Surge protection has several key components:
1. Surge energy must be diverted around key components
2. The minimum amount of surge energy must be diverted through internal cabling
3. Care must be taken to ensure that surges flow via a pre-determined route, and don't find alternative routes
1. Surge protection works by diverting energy. If a voltage spike comes in through the hot wire of your power supply, the job of the surge protector is to divert it to ground. This is done with a suitable surge-detecting switch, which temporarily shorts out the mains supply to ground, diverting the surge away from sensitive equipment. The 3 main technologies used are metal oxide varistors (MOVs), which are passive ceramic devices that instantly convert from insulators to conductors when the voltage goes above a preset threshold (e.g. 250 V); gas discharge tubes (GDTs) are used for signal cables e.g. telephone or cable, which don't carry power, as these are cheaper and don't interfere with signals. Where higher power is required (e.g. direct lightning protection) electronically triggered arc tubes are preferred, but these are expensive.
There are some 'series mode' surge protectors which are heavily marketed. These are devices that block surges electromagnetically. These lead to good protection of the mains supply to protected devices. However, they don't divert the surge effectively - meaning the surge still has to find its way to ground elsewhere. This can lead to greater damage elsewhere. Additionally, signal cables cannot be series protected. Much of the marketing for series protectors due to the fact that they don't divert to ground, and therefore protect the ground from 'surge pollution'. This is moot, as signal surge protection can only be done by diversion to ground.
2. Because surge protectors divert energy, the surge is channelled via ground cables around the protector. This channelling causes problems, as electromagnetic effects can result in the surge being 'mirrored' in nearby cables, which therefore also need protection. Further, long cables impair the flow of the surge, leading to less efficient diversion.
In order to optimise surge diversion, and minimize electromagnetic effects broadcasting the surge into other wiring, the surge protector should be placed at the entrance of the cable to the building. Heavy duty cables should be used to connect the protector to the mains supply, and also to a good quality ground - usually one, or more, high quality grounding rods (relatively common in rural areas), or a good quality electrical ground wire provided as part of the electrical service (common in underground urban supplies).
3. When a current flows in a conductor, a voltage is produced between the two ends (due to resistance/impedance of the conductor). If you have 2 cables coming into a building, one on each side, one will have a long ground wire, to reach the building ground. When a surge is diverted into the long ground wire, a large voltage will appear on the wire (due to the flow of the powerful surge). If a piece of equipment is connected to the main ground, and to this long ground, the voltage may damage the piece of equipment. On the face of it, this installation looks fine - but the surge has instead found an alternative route.
How can this happen? If your phone service comes in the front, but power comes in the back, where the main earth is, then a surge coming via the phone line, will not be completely diverted, because the long ground wire on the phone protector will be forced to high voltage. A device connected to both the phone and mains power will be exposed to the high voltage difference between grounding points and be fried (e.g. modem, or PC).
Similar problems occur with cable TV installations. Because of this risk of damage from differently sited services, the NEC requires that all services enter the building at the same point, so that they can be directly grounded together. In a survey done by one telecoms company, close to 90% of residential installations violate the code in this regard.
Total protection comes from careful adherence to these basic principles. As well as a whole building surge protector, some additional protection will still be needed for sensitive equipment, as some surge current will still reach them, and there may well be considerable 'ringing' of current due to the surge storing energy in stray capacitance and inductance. Ideally, all these extra surge protectors (e.g. integrated surge protected receptacles) should be connected direct to ground via their own grounding wire (although this is not strictly necessary). Where two services need final protection (e.g. cable protector at the cable box), the final protector should protect both mains power and signal cable by diverting them to the same ground.
For maximum protection against problem 3 (alternative routes), the building ground encases the whole building with highly conductive material (e.g. Ufer grounding - the reinforcement in the concrete foundation is used as a giant ground electrode). The low conductivity of the reinforcement bars, ensures that even under surge conditions, the ground voltage remains virtually teh same throughout the building. A similar effect can be obtained by surrounding the building with a ring of heavy copper cable (or copper pipe). The ring ensures that the ground all around the building is at the same, or similar, voltage.