The
London Underground uses a
fourth rail in addition to the third. The fourth runs between the two
running rails and serves as the negative (as opposed to the train's wheels like in
streetcars, most third rail trains, and your
model railroad).
There are a number of disadvantages to third rails in addition to VXO's 'what if you step on it?'. The first will be familiar to anyone who's ever ridden a subway - the lights going out! It's impossible to maintain a complete third rail all the way around a switch, so while your subway car's contact shoe isn't touching the third rail, all the lights go out (along with the air conditioner).
The other is speed limitation. Your typical third rail system would have a maximum speed of about 100 mph or so - anything more and you'd start damaging both the contact shoe on the train, and the third rail itself. Granted for most light rail systems this won't be a problem, but where full-size trains employ a third rail this is limiting for speed.
Third rails produce awesome blue sparks not normally seen with overhead catenary (or maybe it's just because it's dark in the tunnel). They even can be employed for streetcars in the form of a trough running between the rails under the street.