The transistor (or other device) is used as one half of a potential divider to establish the regulated output voltage. The output voltage is compared to a reference voltage to produce a control signal to the transistor which will drive its gate or base. With negative feedback and good choice of compensation, the output voltage is kept reasonably constant. Linear regulators are often inefficient: since the transistor is acting like a resistor, it will waste electrical energy by converting it to heat. In fact, the power loss due to heating in the transistor is the current times the voltage dropped across the transistor. The same function can often be performed much more efficiently by a switched-mode power supply, but a linear regulator may be preferred for light loads or where the desired output voltage approaches the source voltage. In these cases, the linear regulator may dissipate less power than a switcher. The linear regulator also has the advantage of not requiring magnetic devices (inductors or transformers) which can be relatively expensive or bulky, being often of simpler design, and being quieter. Some designs of linear regulators use only transistors, diodes and resistors, which are easier to fab into an integrated circuit, further reducing their weight, footprint on a PCB, and price.
Linear regulators exist in two basic forms: series regulators and shunt regulators.
Series regulators are the more common form. The series regulator works by providing a path from the supply voltage to the load through a variable resistance (the main transistor is in the "top half" of the voltage divider). The power dissipated by the regulating device is equal to the power supply output current times the voltage drop in the regulating device.
The shunt regulator works by providing a path from the supply voltage to ground through a variable resistance (the main transistor is in the "bottom half" of the voltage divider). The current through the shunt regulator is diverted away from the load and flows uselessly to ground, making this form even less efficient than the series regulator. It is, however, simpler, sometimes consisting of just a voltage-reference diode, and is used in very low-powered circuits where the wasted current is too small to be of concern. This form is very common for voltage reference circuits.
All linear regulators require an input voltage at least some minimum amount higher than the desired output voltage. That minimum amount is called the dropout voltage. For example, a common regulator such as the 7805 has an output voltage of 5V, but can only maintain this if the input voltage remains above about 7V, before the output voltage begins sagging below the rated output. Its dropout voltage is therefore 7V − 5V = 2V. When the supply voltage is less than about 2V above the desired output voltage, as is the case in low-voltage microprocessor power supplies, so-called low dropout regulators (LDOs) must be used.
When the output regulated voltage must be higher than the available input voltage, no linear regulator will work, (not even a Low dropout regulator). In this situation, a switching regulator of the "boost" type must be used.