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Umm well basically as its name implies, it regulates a voltage around a preset value, in the case of the one you mention, @ 5v.
However there are certain conditions the regulator requires to function correctly, its input voltage for one. The 7805 requires a minimum of around 8v in order to provide the requisite output.........It will continue to provide the 5v output as long as the load current/output voltage product doesnt exceed the package temparature limit.......the reg will shut down on thermal overload........check out the manufacturers data sheet for more detail on the technicalities of this wonderful little device.
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