The yellow wire was indeed used for ground, required for the generally used type of party-line ringing, and also for calling party identification when DDD came along.
Two wires were required, as for all electrical circuits, for the lights on Princess and Trimline phones. They were normally on yellow-black. Usually a wall war was used, but there were also separate plug-in transformers with binding post terminals that could be put in an inconspicuous location and multipled (normally on the yellow-black) to several Princess or Trimline phones.
Later examples of Trimline phones got the power for the lights from the phone pairs (another task for the C.O. battery).
Wes Leatherock snipped-for-privacy@aol.com