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The neutral conductor (also referred to as the grounded conductor) is used in order to establish a ground reference in an electrical system. Without this reference, circuit breakers would not reliably trip (most likely, they would not trip at all) in response to an overcurrent condition. This is a dangerous situation which would lead to destruction of equipment and loss of life.
The other primary reason to include a neutral conductor is to stabilize the voltage in a single phase or three phase distribution system. Without a neutral conductor the voltage on ungrounded (hot) conductors would raise or lower due to varying load conditions. This erratically fluctuating voltage would cause damage to equipment and potentially harm people as well.
The neutral conductor is very important to ensure safety in electrical circuits.
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For wiring in the USA the Neutral conductor is required to be white or gray by the National Electrical Code.
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Neutral is the current return for the hot leg(s). Neutral is grounded, so as to limit the maximum voltage of any of the hots with respect to earth ground. In a typical residential 120/240VAC split phase system, either of the hots with respect to neutral is 120VAC. In a three phase system, neutral is at the center of the wye configuration, and each of the three hots returns power to it.
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