1) Michael Faraday discovered electromagnetic induction through experiments showing that changing the current in one coil can induce a current in another nearby coil. The effect is stronger if the coils have an iron core.
2) Faraday's law states that the induced electromotive force (EMF) in a coil is equal to the negative rate of change of the magnetic flux through the coil. Lenz's law describes how the direction of induced current opposes the change in magnetic flux that created it.
3) Transformers use this principle to change the voltage of alternating currents between coils with different numbers of turns. The ratio of turns determines the ratio of voltages in each coil.