The household electrical connections mainly consist of live, neutral and earth wires.
The potential difference between live and neutral wires is around 220 V.
Sometimes, due to fault in the electrical appliances or damage of the insulating coating around the two wires i.e., neutral and live, the two wires come in contact with each other and large current flows through them causing short circuit.
Large amount of heat is produced due to flow of this large current. Any inflammable material like wood, plastic, cloth, etc. present around the short-circuited place can catch fire.