What are Reverse Loops?
A reverse loop, sometimes called a balloon track because of its shape, allows a train to change direction without going in reverse. On the prototype, these tracks consume a lot of land as trains can not handle sharp turns. They are used however, espescially at coal mines, grain elevators, power plants and similar large industries that can load / unload an entire train. What they cost in space, they save in time and efficiency. Locomotives do not need to be uncoupled, turned and run-around the train. Trolleys frequently use reverse loops at the ends of runs, taking advantage of their tighter turn radius.
On a model railroad, as with the prototype, reverse loops consume a lot of space, but are the fastest way to turn an entire train. One of the most common uses of reverse loops in modern layout design is as part of a staging yard at the end of the run. Here, trains can be held until needed or desired on the layout. By incorporating a reverse loop, arriving trains can be quickly turned and "restaged" or readied for their next run.
What's the Problem?
Most model railroads use the tracks to transmit power to the trains. The majority of two-rail track systems use a positive (+) voltage on one rail and a negative (-) on the other. In an a reverse loop arrangement, the left rail will eventually touch the right rail and create a short circuit. The same rules hold true for other reversing track sections including wyes and turntables. Other typical track arrangements, like a "Figure-8" look like reversing loops, but aren't. If you have find a short circuit that is fixed by removing a section of track, there is a good chance you've got a reverse loop in there somewhere.
Three-rail track systems, most commonly associated with O Gauge trains, solve this problem by putting a common voltage on both outside rails, using the center rail for the opposite. In this way, the positive and negative rails never meet.
Fortunately, there are easy solutions to these electrical problems that don't involve adding a third rail.

