The word Terra is latin for Earth. This system uses the mass of the earth as a path for a fault current to pass. The neutral is earthed at the substation via an electrode in the form of a copper rod or mesh. The protective earth of the installation is also connected to earth via an earthing electrode. A fault current is able to flow between the supplier and installation through the earth.
The protective earth (PE) cable is seperate to the neutral conductor and runs independently between the installation and the substation. The outer sheath of the supply cable is usually used as the protective earth conductor.
This system involves the protective earth (PE) and neutral conductor being combined to form a PEN (protective earth neutral) conductor. No seperate earth cable is required between the installation and the supply transformer.