According to the principles of electromagnetic induction, a voltage is induced in any object in which a changing magnetic flux cuts across. If the object is electrically conducting, the voltage induces a current in the conductor. It is called an eddy current because the path of the current is circular. Eddy current is usually a parasitic loss (e.g. in transformer and inductor coils), but it also finds useful application in various mechanical devices.

The amount of eddy current is proportional to the product of the frequency of the changing magnetic flux and the magnetic flux density. The parasitic loss is proportional to the product of the square of the frequency and flux density. The constant of proportionality is somewhat complicated to find, but it depends on the conductivity of the material, its shape, and its size. The magnetic permeability of the material also matters, because a higher permeability will create a higher flux density.

To lower parasitic loss caused by eddy currents, a material with a lower conductivity or magnetic permeability can be used. If a suitable alternative material cannot be used, a laminated core can lower the losses. Laminated cores consist of many thin sheets of material insulated from each other. This restricts eddy currents to smaller paths, reducing the parasitic loss.