The conductor inside the fuse is made of a metal similar to solder. It has a lower melting point than the wire itself. The size of the conductor is calibrated very carefully so that when the rated current is reached, enough heat is generated to melt the conductor and so break the circuit.
Bad connections can happen for a variety of reasons. As wires carry electricity they get hot, so it is possible after a lot of use for a connection to melt and no longer make contact. If the connect is outside of the cabin of the car it could get rusty or dirty to the point where electricity will no longer flow. It is also possible that from use and vibrations the wires simply disconnect. In this case you need a wiring diagram for your vehicle, a circuit tester and a lot of patience.
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