How they work!

first of all a slight understanding of  transformers will be useful so here goes ... 

A transformer is a device which has 2 sets of copper coils each wrapped around an iron core. This creates an electromagnetic field around the core.

A Transformer has a different number of turns on the primary coil than the secondary coil which enables a change of voltage .... For Example: if the primary coil has 100 turns and the secondary coil has 200 turns, the voltage will be doubled and the current halved on the output of the secondary coil.

These transformers are not 100% efficient and therefore losses are made in the form of: Copper Losses, Hysterisis Losses and Eddy Currents.

Ground Loop Isolator

A ground loop isolator has inside it a transformer with a 1:1 ratio of windings on each coil, This means that the voltage applied to the primary coil will be identical to the voltage given from the primary coil (with slight losses as described above)

HOWEVER ......... The interference which will be present in your audio has a very low voltage, this is usually why it can only be heard when the volume is high. This means that the voltage of the interference is too low to be able to be present in the electromagnetic field created by the primary coil and therefore too low to be able to be picked up by the secondary coil.

This means that only the high volume noise (your music) is picked up by the secondary coil and sent to your amp ... Resulting in a high loss of interference!