I have talked to many boat owners and found that the electrical connection between AC and DC is very misunderstood by most of them.  Throw in Bonding, Grounding and lightning protection and people get so confused it becomes a real muddle.

To separate the issue and understand what the connection is, where it is, and why it is, you first need to start with some definitions. You also need to think about these as separate systems that just happen to be connected at one, and only one, point on the boat.

DC:  Direct Current. A low voltage system usually 12 Volts, but on large vessels can be 24, or 48 volts, to power basic equipment, using a battery.  It is a two wire system, positive (red) and negative (black or yellow), but there can be a third wire, a green grounding wire or a ground buss connected to the boat's ground. This is not normally a current carrying conductor.  See DC grounding conductor below.  (See DC systems http://newboatbuilders.com/pages/electricity1.html)

AC: Alternating current. Basically the same 110 Volt system (nominally 120 Volt)  you have at home, with some very important differences. It is a three wire system with a hot wire (black), a neutral (white and also very hot) and a green wire. The green wire (the safety wire) is an alternative path for current back to earth and is not normally a current carrying conductor. See AC grounding conductor below.  220 Volt AC systems are rarely seen in the USA but common in Europe on boats. (See AC systems http://newboatbuilders.com/pages/electricity7.html)

Bonding: electrically connecting all metal fittings on the hull, that are in contact with the water, and connecting them to the earth ground, so they are all at the same voltage potential, zero.
See http://newboatbuilders.com/pages/electricity6.html

Lightning Protection: A separate system to provide a direct, resistance free path for lightning to earth ground while protecting the boat and it's occupants. ( a very simplified definition)  See http://newboatbuilders.com/pages/links_electrical.html for links to lightning protection systems information.

Grounding System: See ABYC definition of Ground below.  Making a connection between systems or equipment on a boat to bring that system or equipment to zero voltage potential.  The grounding system may be connected to the engine negative terminal, or connected to a ground buss that is connected to the engine negative terminal.

The following are taken directly from ABYC Standard E-11 AC and DC electrical Systems on Boats.

11.4.1 AC grounded conductor

A current carrying conductor that is intentionally maintained at ground potential.

NOTE: This may be referred to as the neutral (white) conductor in AC electrical systems.

11.4.2 AC grounding conductor (green or green with a yellow stripe)

A conductor, not normally carrying current, used to connect the metallic non-current carrying parts of AC electrical equipment to the AC grounding bus, engine negative terminal or its bus, and to the source ground.

NOTE: The source of electrical power may be the shore AC power, an inverter, an isolation transformer or a generator.

11.4.5 DC grounded conductor

A current carrying conductor connected to the side of the power source that is intentionally maintained at boat ground potential.

11.4.6 DC grounding conductor

A normally non-current carrying conductor used to connect metallic non-current carrying parts of direct current devices to the engine negative terminal, or its bus.

11.4.8 Engine negative terminal

The point on the engine at which the negative battery cable is connected.

11.4.12 Ground

The potential of the earth's surface. The boat's ground is established by a conducting connection (intentional or accidental) with the earth, including any conductive part of the wetted surface of a hull.

11.4.20 Polarized system AC

A system in which the grounded and ungrounded conductors are connected in the same relation to terminals or leads on devices in the circuit.

11.4.21 Polarized system DC

A system in which the grounded (negative) and ungrounded (positive) conductors are connected in the same relation to terminals or leads on devices in the circuit.

So where are all of these normally connected?

The DC System is connected by the DC grounding conductor to the engine negative or it's Buss. This is usually the wire from the battery negative terminal to the engine starter motor, but it can be a separate wire from the battery negative to the engine block.

The AC system is connected to earth ground in two ways, one on the boat and one not on the boat. The AC grounding conductor (the green wire) is connected to the earth ground at the engine negative terminal.  The other connection to earth ground is always at the source of power, the power generating station, where the AC Grounded conductor (the white wire, neutral) and the AC Grounding conductor (the green wire) are connected to each other,  and connected to earth ground..  The exception to this is, if you have an isolation transformer, then there is no physical connection from the boat  to the earth ground at the power station, only on the boat.  The AC Grounded conductor (the white wire, neutral) and the AC Grounding conductor (the green wire) are connected to each other at the transformer, the source of power.  If you have an on board generator, or an inverter then the AC Grounding conductor is connected to earth ground internally inside the generator or inverter, the source of power.  But the only connection on the boat that matters to you the owner/installer/technician,  is the connection to the engine negative terminal or the grounding buss.

Grounding System:  Some equipment on boats, that are not part of the electrical system, need to be at zero potential and provide a path to ground for any static electricity that may occur.  In particular the fuel system, fuel tank, fuel fill, and fuel tank fittings need to be connected to ground to dissipate any static electricity that may occur during fueling.  The wires for the fuel system ground go to the engine negative terminal or the grounding buss.

Bonding wire: The bonding wire, also a green wire, is connected to earth ground at the engine negative terminal or the grounding buss.

Lightning protection system: the lightning protection system is also connected to the engine negative terminal. But when making connections for the Lightning Protection system care must be taken to follow the instructions in ABYC TE-4 Lightning Protection.  ABYC www.abycinc.org.

ABYC has anticipated combining DC Grounding systems and Bonding systems.  In E-11 it says:

11.16.2.5 Combined DC Grounding and Bonding Systems

The DC grounding conductors may be combined with the following systems providing all the requirements with respect to conductor size are met for each system. (SeeFIGURE 18, FIGURE 19 and FIGURE 20)

11.16.2.5.1 Lightning Protection - See ABYC TE-4, Lightning Protection.

11.16.2.5.2 Cathodic Bonding - See ABYC E-2, Cathodic Protection.

11.16.2.5.3 Static Electricity Grounding – See E-11.15.2.3, ABYC H-24, Gasoline Fuel Systems, and ABYC H-33, Diesel Fuel Systems. 

The reason behind all of these systems being connected at the engine negative terminal is the same for all of them.  To put the system at zero voltage potential during normal operation, and provide a zero voltage reference point from which to measure voltage potential on the positive and hot side.   They act as an alternative path for current back to earth ground, but only if there is a ground fault in the system. This prevents shock hazards and you from being the path for current back to ground. It also prevents stray current corrosion and galvanic corrosion.

See the diagram below:  Click on it to Enlarge.