Here's a reasonable explanation, from
https://fredsappliance.com/service/3-prong-vs-4-prong-dryer-outlets-whats-the-difference/ I edited it slightly for clarity.
Most homeowners have run into problem of trying to hook a 3-prong dryer cord up to a 4-prong outlet, or vise-versa, at one point or another. Whether you move into a new home that has a different outlet or purchase a new dryer with a different power cord, this is an all-too-common scenario. Unfortunately, few people understand the different between 3-prong and 4-prong dryer cord. In an effort to shed some light on this subject, we’re going to discuss the purpose of these cords and why there’s a growing popularity for 4-prong cables.
Up until the mid 1990s, 3-prong outlets were the standard used in American homes. Nearly all homes built before this time featured either a 3-prong outlet or range outlet (slightly different than a typical 3-prong dryer outlet). It wasn’t until 1996 when the National Electrical Code (NEC) was updated to require 4-prong dryer outlets in all new homes. Existing homes may still use 3-prong outlets, as the NEC changes are limited strictly to new homes.
So, why did the NEC make the decision to switch from 3-prong to 4-prong dryer outlets in new homes? Although the old 3-prong outlets were effective at providing power to dryers, they had one major flaw: the ground and neutral wires were grouped together, creating the potential for shock. 3-prong dryer cords contain two ‘hot’ wires, along with a third wire that acted as both the ground and neutral wire. If a current happened to make its way onto the ground wire, it could travel up to the dryer, leading to the metal frame of the dryer becoming energized.
The more recent 4-prong dryer cords feature two hot wires, a neutral wire and a ground wire. This eliminates the possibility for a ground current traveling to the machine, as it features a separate return path.
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This is from the 2011 NEC (note that many areas of the country are using the 2014 NEC, but the information is the same.) I found this at
http://diy.stackexchange.com/questi...-three-pronged-wire-into-a-four-pronged-dryer
2011 NEC Article 250 Grounding and Bonding
VII. Methods of Equipment Grounding
250.140 Frames of Ranges and Clothes Dryers
Frames of electric ranges, wall-mounted ovens, counter-mounted cooking units, clothes dryers, and outlet or junction boxes that are part of the circuit for these appliances shall be connected to the equipment grounding conductor in the manner specified by 250.134 or 250.138.
Exception: For existing branch-circuit installations only where an equipment grounding conductor is not present in the outlet or junction box, the frames of electric ranges, wall-mounted ovens, counter-mounted cooking units, clothes dryers, and outlet or junction boxes that are part of the circuit for these appliances shall be permitted to be connected to the grounded circuit conductor if all the following conditions are met.
- The supply circuit is 120/240-volt, single-phase, 3-wire; or 208Y/120-volt derived from a 3-phase, 4-wire, wye-connected system.
- The grounded conductor is not smaller than 10 AWG copper or 8 AWG aluminum.
- The grounded conductor is insulated, or the grounded conductor is uninsulated and part of a Type SE service-entrance cable and the branch circuit originates at the service equipment.
- Grounding contacts of receptacles furnished as part of the equipment are bonded to the equipment.
Here is the handbook commentary: The exception to 250.140 applies only to existing branch circuits supplying the appliances specified in 250.140. The grounded conductor (neutral) of newly installed branch circuits supplying ranges and clothes dryers is not permitted to be used for grounding the non–current-carrying metal parts of the appliances. Branch circuits installed for new appliance installations are required to provide an equipment grounding conductor sized in accordance with 250.122 for grounding the non–current-carrying metal parts.
Prior to the 1996 Code, use of the grounded circuit conductor as a grounding conductor was permitted for all installations. In many instances, the wiring method was service-entrance cable with an uninsulated neutral conductor covered by the cable jacket. Where Type SE cable was used to supply ranges and dryers, the branch circuit was required to originate at the service equipment to avoid neutral current from downstream panelboards being imposed on metal objects, such as pipes or ducts.
Caution should be exercised to ensure that new appliances connected to an existing branch circuit are properly grounded. An older appliance connected to a new branch circuit must have its 3-wire cord and plug replaced with a 4-conductor cord, with one of those conductors being an equipment grounding conductor. The bonding jumper between the neutral and the frame of the appliance must be removed. Where a new range or clothes dryer is connected to an existing branch circuit without an equipment grounding conductor, in which the neutral conductor is used for grounding the appliance frame, it must be ensured that a bonding jumper is in place between the neutral terminal of the appliance and the frame of the appliance.
The grounded circuit conductor of an existing branch circuit is permitted to be used to ground the frame of an electric range, wall-mounted oven, or counter-mounted cooking unit, provided all four conditions of 250.140, Exception, are met. The exception can be applied only where the existing branch-circuit wiring method does not provide an equipment grounding conductor. There are many existing branch circuits in which nonmetallic sheath cable with three insulated circuit conductors and a bare equipment grounding conductor was used to supply a range or clothes dryer. The bare equipment grounding conductor was simply not used because it was permitted to ground the equipment with the insulated neutral conductor of the NM cable. This “extra” conductor results because the bare conductor in a Type NM cable is to be used only as an equipment grounding conductor and cannot be used as a grounded (neutral) conductor in the same manner as is permitted for the uninsulated conductor in Type SE cable.
In addition to grounding the frame of the range or clothes dryer, the grounded circuit conductor of these existing branch circuits is also permitted to be used to ground any junction boxes in the circuit supplying the appliance, and a 3-wire pigtail and range receptacle are permitted to be used.
Exhibit 250.55 shows two examples of existing installations in which Type SE service-entrance cable is used to supply ranges, dryers, wall-mounted ovens, and counter-mounted cooking units. Junction boxes in the supply circuit are also permitted to be grounded from the grounded neutral conductor. In the bottom diagram the service-entrance cable installed from the feeder panelboard to the range or clothes dryer outlet contains an insulated grounded conductor to prevent incidental contact between the conductor and metal enclosures. Such contact could result in current being introduced onto circuit paths other than on the intended path, which is the grounded (neutral) conductor.**
