what is meant by fault current and leakage current? in electrical system.

The fault current rating on a supply is the maximum current that can be expected to flow under short circuit conditions. This is the current that flows before the protection equipment operates. (or if the protection equipment does not operate!!)
Fault current ratings are of particular importance when you are designing the protection regime as the switches, fuses circuit breakers etc have to be able to interrupt the fault current. With many interruption devices, it the fault current is too high, they will not be able to interrupt the current flow.
The fault current is essentially determined by the impedance of the supply

Best regards,

I believe leakage current is the current passing due to a voltage accross a leakage impedance. The leakage impedance occurs when you get coupled magnetic sysems like transformers or induction motors. Basically if you couple two magnetic fileds only some of the magnetic flux lines link(think of magnets and iron filings) . The ones that link are refered to as mutual lines of flux. Some of them don't link hoever and these are refered to as leakage flux (i.e. they are only associated with a single magnetic source and don't transfer to the other so they 'leak' out)
The best description of this effect can be found in a text on the ideal transformer which you will find at the start of most power electrical engineering text books (generally around the area where they introduce per unit systems)