How balanced XLR audio works

XLR refers to the type of connector used, but the concept of "XLR audio" is generally referring to the balanced audio mechanism its most popularly know for.

Balanced audio uses a 3 wire model: GROUND/SHIELD, POSITIVE/HOT/In-Phase and NEGATIVE/COLD/Out-Of-Phase

The ground provides an electrical ground to the device connected to it.  The Positive in-phase and Negative out-of-phase signal contain a copies of the analog signal with one signal electronically flipped to be a mirrored version of its original.  These two signals pass, down the wire, any encountered external interference being applied to both signals.  The receiving device (mixer usually) flips the mirrored signal back and recombines the signals together, restoring the original signal and cancelling out interference.

This diagram shows the audio signal entering the microphone, transformed into a balanced "positive" and "negative" signal and sent on an audio wire to a mixer on the right.

How balanced XLR audio works (click on it to zoom)

The red and blue squares represent interference encountered as the signal travels along the wire between the microphone and mixer.

When the signal arrives at the mixer, the negative signal is flipped back, restoring the full original audio, and the interference cancels itself out.

IN DETAIL
The audio signal enters the microphone, where the signal is copied, with one copy going out the positive connection and an inverted 180° out of phase copy of the signal simultaneously goes out the negative connection.  The signals are identical, but a mirror "opposite" of its counter part.  As the wave form goes up on the positive, the negative form of the wave does the same thing, but in an opposite form.

As the audio signal flows along the wire, external interference that is encountered will affects both the negative and positive signal equally and simultaneously.  The interference represented by the squares applies itself simultaneously to both copies of the signal on the wire.  The interference is pushing the red signal 'upwards', and that same interference on the negative (blue) signal is also pushing the signal 'upwards.

Upon reaching the mixer, the inverted negative signal flipped (in blue) back to 'normal' to match the copy of the signal on the positive (red) connection using a differential amplifier.

When the negative signal is inverted, both the positive and negative sound wave match perfectly, but what doesn't match now is the signal for the interference that is encountered, it is now 180° out of phase with each other.  

When the two signals are recombined, two things happen.  The overall level of the original sound file increases (superposition) and the squares that represent the interference in the line, cancels itself out (know as "destructive interference").  It should also be noted that when the signals are combined, the final signal level is larger too.  My diagram does it being same heights, which is a little bit misleading.

The original clean signal is now at the destination!

This is the how you get clean audio signals over long distance cables!!

Heres a bit of a real world visual.

In this picture, I've taken two leads from an oscilloscope and connected them to the positive and negative pins of an XLR microphone.

On this dual channel scope, you can see positive (top) and negative (bottom).  

You can see the signals are opposite to each other.