How does a geothermal heating and cooling system work?

Outdoor temperatures fluctuate with the changing seasons but underground temperatures don't. Four to six feet below the earth's surface, temperatures remain relatively constant year-round. A geothermal system, which typically consists of an indoor unit and a buried earth loop, capitalizes on these constant temperatures to provide "free" energy. In winter, fluid circulating through the system's earth loop absorbs stored heat and carries it indoors. The indoor unit compresses the heat to a higher temperature and distributes it throughout the building. In summer, the system reverses, pulling heat from the building, carrying it through the earth loop and depositing it in the cooler earth.