I notice that, on some of my (self-installed) power outlets, when I pull an appliance plug out of it, there is a small arc. This most frequently happens with an iron, which has no switch of its own and is on when you plug it in. Can anybody explain why this is happening, the physics behind it, is it "as designed", harmless, or indicative of an issue (potentially a fire hazard)?
Whenever you have an appliance that is drawing current, and you pull the plug while it is in operation, you are going to draw an electrical arc. The voltage is high enough that current still wants to flow through the air to power the item. This is not a good situation. Items that draw high amounts of current, ie; high wattage, should have an on/off switch in them to prevent this situation. To some degree, it happens when you plug them in as well.
The effect is that you are burning the metal contacts in the outlets and the prongs of the plug. As they become pitted and blackened, they do not conduct electricity as well, become highly resistive, thus creating heat and eventually will fail or burn up. This is an unsafe condition.
The solution: Make sure appliances are off before you plug them in or unplug them. If you own an iron, then always set its temperature dial to 0 (zero) or "Off" before you plug it in or unplug it. (Source: Panasonic's "Important Safety Instructions" page).
All wires (or rather, flows of charges through space) exhibit a phenomenon called inductance, and when great lengths of thin wire are wound into coils, large inductances can be created on purpose. Furthermore, if the coils are wound around cores made from ferrite or iron, the inductance phenomenon is even stronger.
Coils wound around cores are found in electric motors, and in power supplies (for instance, transformers).
Inductance manifests itself as an opposition to the change in electric current. When a steady current flows through an inductor, the only effect exhibited by the inductor is its series resistance, and the steady magnetic field that it maintains. Whenever the circuit tries to change the amount of flowing current, it changes the magnetic field around the inductor, which generates a voltage within the inductor that opposes the change in current. The inductor initially forces the current to keep flowing at the original rate, and from that point on it gradually adjusts its state (density of magnetic field) to allow the current to reach the new value.
For instance, if we have current flowing in a circuit through an inductor and we suddenly interrupt the circuit (attempting to cut the current to zero), at that very moment of severance, the same current continues to flow, thanks to the inductor. The collapsing magnetic field in the inductor will develop the necessary voltage to make it so. This is informally called "inductive kick". The voltage is much higher than the supply voltage for the circuit.
A real world open circuit is not an infinite resistance. "Infinite resistance" is just an idealization of the open circuit. In reality, current can flow through what looks like an open circuit if the voltage is high enough to make electrons jump through space. The phenomenon of inductance can generate the necessary voltages to make this happen.
The inductive kick can damage electronic components. In circuits where sensitive semiconductors are combined with inductors which can suddenly switch off, measures have to be taken to help the inductive kick safetly dissipate: for instance using diodes. It can also generate radio frequency interference, both through power line wires, and radiated through space due to the spark. (Early radio transmission worked by generating sparks!)
In internal combustion engines, the ignition coil causes a deliberate spark via an inductive kick. The spark is exploited as a way of lighting the fuel-air mixture at a precisely controlled time. If you operate the coil without a spark plug, you can damage the coil or other components. If the inductive kick cannot dissipate itself across the small air gap in the spark plug (which is normally the path of least resistance), it will find some other path, such as through the casing of the coil, which can cause damage. Never crank the engine if a spark plug is disconnected.