Scooterman is right...I messed up what I was trying to say. What I was trying to get at is that if you have the old two prong outlets, and want to trade them out for the three prong type the only legal way to do it (without adding a ground wire to the whole system)is put a GFCI type receptacle at the beginning of the circuit then wiring the new three prong outlets so that the are using the GFCI. Then you have to label them as being nongrounded GFCI circuit outlets. This is based on WA State practice and experience of course, but since they follow the NEC and NESC like the rest of the country, I would think it would be the same all over. The reason for labeling the new three prong outlets as being an ungrounded GFCI circuit is so that you know that things like surge supressors won't work if plugged in to them.
The thing about the ground "wire" is that the GFCI will still open without the ground wire attached to the receptacle. You only need a path to ground....when you are getting a shock it is because you are the path to ground. If you become the path to ground(which, again, is how you get shocked) The GFCI will still sense the .005 amp or higher difference in potential it is measuring between hot and neutral and effectivly open it in 1/40th of a second. You may still feel a quick shock, but the idea is that you won't die or be seriously injured. GFCI's are not intended for equipment protection, that is what fuses and circuit breakers are for, they are to protect "us".
If you feel savvy enough to test this out yourself it is really easy...I just did it a second ago to verify........If you own a Vol-con or "wiggins" style electrical tester...not a multimeter, but the two prong "spring" style testers...If you don't know what I mean, don't even try this. I'm sure electrical savvy folks will know. Assuming you have a GFCI circuit in your kitchen with at least one regular outlet after the GFCI...simply test from the shorter "hot" side on the right to the ground hole....the GFCI should trip...it sensed a difference in potential caused by the tester (ordinary testers cant be used to check hot to ground voltage in GFCI circuits, they will trip them...hot to neutral it will read, but not to ground.) Now if you feel like continuing...shut off the circuit at your panel and test nuetral to hot to ensure it is off. Undo the GFCI receptacle from the wall, leaving it hooked up ofcourse, except remove the ground wire from the GFCI. Now after ensuring all is safe, turn the breaker back on. repeat the test at the outlet after the GFCI...the GFCI will still trip even though the ground is not hooked up to it. It still senses the potential difference which is measured between hot and neutral. This will not work at the GFCI itself because by removing the ground you have removed the path to ground...If you do test this at the GFCI itself, then test from "hot" on the right side to a nearby ground , like a screw holding on a nearby switch plate or outlet plate. Then it will work. Remember the purpose of the test is to simulate a ground fault....electricity leaking to ground....(through the tester....and in a real situation "you" would be the electrical tester.
Some examples would be you sticking your finger in the outlet and then touching a plumbing fixture hooked to a grounded water pipe...ground fault..
or
You drop you hair dryer in the tub full of water which has grounded fixtures....ground fault
Remember to be shocked you have to complete a path to ground from electricity. Ever wonder why birds can sit on a power wire??? they have no path to ground.
So yes "you do need a path to ground" for a GFCI to work...you just don't need a ground wire attached to the GFCI outlet itself.
Disclaimer: none of this is meant in any way to cause or suggest that people take on any electrical projects that they don't feel comfortable or experienced to try.