Litz wire & skin effect

The problem with the skin effect is that it forces the electrical current to flow near the surface of the wire. At high currents this can be an issue because, basically, the entire wire is not utilized resulting in higher cable losses and less efficiency.

The skin effect works like this (in a very dumbed down way): Current flowing in a wire will create a magnetic field, this magnetic field interacts with the current flowing. The net effect is that the current wants to "leave the wire" but can't because it's insulated. So instead the current bunches up at the edges of the wire and not in the middle.

Now, imagine that you have stranded wire, but not Litz wire. The skin effect will make the current want to leave the individual wire strand, and since there is a conductive path (another strand) the current WILL leave the strand. The end result is that a stranded wire is no better than solid wire when it comes to the skin effect.

Litz wire is like stranded wire but with the individual strands insulated from each other. So when the skin effect causes the current to want to leave the strand, it can't. Litz wire goes another step, however, by carefully arranging the strands in various ways to further even out the effects of the skin effect and other strange electro-magnetic effects. None of this would be possible with non-insulated strands.

To expand a bit about skin effect, the magnetic fields from AC current sets up eddy currents inside the conductor, with the net effect that current exponentially decays from the surface of the conductor.

Since stranded wire conducts between strands, the eddy currents will still "swirl" through the whole cross section of the wire. You might see some increased skin depth due to the slightly higher resistivity of stranded vs. solid core, but it would still be for the whole wire rather than each strand.

For a tangible example, you might consider a Faraday cage during a lightening strike.