That is from core losses. Resistive losses aside, the bulk of transformer power loss is due to magnetic effects in the core. Perhaps the most significant of these "core losses" is eddy-current loss, which is resistive power dissipation due to the passage of induced currents through the iron of the core.
Because iron is a conductor of electricity as well as being an excellent "conductor" of magnetic flux, there will be currents induced in the iron just as there are currents induced in the secondary windings from the alternating magnetic field. These induced currents tend to circulate through the cross-section of the core perpendicularly to the primary winding turns. Their circular motion gives them their unusual name: like eddies in a stream of water that circulates rather than move in straight lines.
Iron is a fair conductor of electricity, but not as good as the copper or aluminum from which wire windings are typically made. Consequently, these "eddy currents" must overcome significant electrical resistance as they circulate through the core. In overcoming the resistance offered by the iron, they dissipate power in the form of heat. Hence, we have a source of inefficiency in the transformer that is difficult to eliminate.
Another "core loss" is that of magnetic hysteresis. All ferromagnetic materials tend to retain some degree of magnetization on a molecular level after exposure to an external magnetic field. This tendency to stay magnetized is called "hysteresis," and it takes a certain investment in energy to overcome this opposition to change every time the magnetic field produced by the primary winding changes polarity (twice per AC cycle).
Each molecule of the ferromagnetic material (commonly referred to as ?domains?), must physically line up with the magnetic field, this cases friction to produce heating in the core and the familiar ?B flat? hum that transformers produce.
