Sorry for the late reply, Hazel. I had to brush up on my Elec. Eng'g. theory.
In a nutshell, an isolation transformer gives you a 'cleaner' feed of electricity by physically separating the power company feed to your studio's power circuit. In essense, all transformers are isolation transformers, but iso transformers are built to handle the loads required of them while minimizing the transmission of noise from the outside circuit to your studio - a certain amount of faraday shielding is built into these transformers.
The outside power circuit is unbelievably noisy. From electric motors to flourescent ballasts to RFI interference; even Meralco's ground wire (the topmost single wire you see in transmission lines) is noisy. Although most of our gear have filters in the power supply, it was mostly meant to stabilize variations in power. Noise filtering is a secondary function, but, invariably, some of this noise creeps into your equipment. The iso transformer minimizes the intrusion of this powerline noise. It is still dependent on good grounding, though. The secondary coil feeding your studio has it's own ground separate from the ground in the primary coil.
After my rather futile attempt at explaining iso transformers, I think
this site can better explain the principle.
