You want to place the clip in the return path of the signal you are measuring, as close as possible to the tip so as to minimize extraneous ground currents from upsetting your measurement.
[Merged] still a little confused on ground clip pf oscilloscopes
Is it better to connect ground clip of oscilloscope near component i am measuring on secondary of isolation transformer or is it just as good to connect it at the voltage terminal of transformer secondary, woulnt that earth reference entire line?
It's better to put it near the component. If you put it at the transformer then any currents(from other circuits) in that path will upset your reading. Look at this way: you drain the sink in your house. If you look at the water going into your sewer line you'll only see what's coming out of your sink, but if you look at the sewer line back at the sewage treatment plant...
Is it better to connect ground clip of oscilloscope near component i am measuring on secondary of isolation transformer or is it just as good to connect it at the voltage terminal of transformer secondary, woulnt that earth reference entire line?
Internally to your scope, the ground terminal of your leads is already connected to the safety ground of the power plug. Where that goes in your isolation transformer situation is not clear. If the scope was designed to be used only with an isolation transformer then it is possible that its ground terminal is also isolated from the power. But probably not. Before you go connecting the ground terminal anywhere, find out if that ground terminal is connected to any local ground. Just make sure that when you connect the ground lead to something in your circuit that you are instrumenting that you aren't shorting something out.
Usually when a line-powered scope is used to instrument a circuit, that circuit is either floating or ground-referenced to the same ground as the scope. If it is floating, then connecting the ground lead will force it to have the same ground reference as the scope. Even if the circuit is already ground-referenced, and you could theoretically omit the use of a ground clip, it is still a good idea to use it, connected to a ground point near the point being probed, as barry said.