At the start Hot (Tip) carries the original signal and earth (Sleeve) acts like a screen (rather like a TV area cable, it try’s to stop signals from escaping and also try’s to prevent hums and spikes from getting onto the Hot.
This system works ok for short cable runs as long as you keep it at leased 30cm from any mains cables. You would not tend to see unbalanced wiring in a studio, unless it is a budget studio.
At the start Hot (Pin 2) carries the usable signal and cold (Pin 3) carries the reverse signal. The earth (Pin 1) carries the reference voltage 0 volts.
At the destination Cold is again reversed and then combined to Hot.
Now any spikes and hums that are picked up on the way are now canceled out and the original signal remains clean.
As you can see the spikes and hum are also reversed when they enter the input of the effect, which means that the only signal that is out of phase will be the spikes and hum.
The reference 0 voltage is very import as if the voltage at the end of the cable is different than that at the start, when the reverse signal is combined to the orriginal you won’t cancel out all the hum and spikes because the 0 volt line would be different.