Is it suck current or voltage?
It sucks current, which decreases the gate-source voltage and makes the MOSFET "turn OFF more". As the load current increases past the limit value, the transistor starts to conduct and starts to suck bias away from the MOSFET. The MOSFET conducts less, and the output voltage drops. Assuming the load is resistive, this causes the output current to drop as well, until an equilibrium is reached. Thus, the output current is limited.
(Regarding adding a capacitor from the MOSFET gate to the negative rail)
Are you mean a Low pass filter?
Yes. I would describe it as smoothing, but low-pass filtering is the same thing.
How to add a kind of power limiting for the MOSFET?
It's not easy to add. Ideally the circuit needs to limit the instantaneous power dissipated in the MOSFET, and limit its temperature. I haven't seen any circuits for this that I could point you to. Anyone? Anyone? Bueller?
Is this isolating transformer like the one in the front end of a SMP power supply?
No. Switching power supplies don't have a transformer at the input. Maybe you're thinking of the common-mode choke at the input of a switching supply? That is part of the interference reduction circuit. It's not an isolating transformer.
still one point: all modren power supplys found in computers, TVs and monitors are all using the same front end, i.e. 220v mains, RF filter, rectifier bridge, big electro cap then to a mosfet through a primary windings of a high frequency transformer. I want to say that is actually used in a real life
No, that's different. Switching supplies DO have isolation, from the live-side circuitry (all the stuff that's powered from the bridge-rectified mains voltage) to the secondary side.
Everything that's galvanically connected to the mains is LIVE and must be properly insulated, in order to pass safety regulations. Circuitry that's connected to bridge-rectified mains voltage is HALF LIVE. If you connect a light bulb from the negative rail (after the bridge) to mains earth (which is connected to mains neutral), the bulb will light up. And so will you, if you touch anything that's fully live or half live.
The output(s) are isolated from the input, and the 0V rail for the outputs can either be floating relative to mains, or linked to mains earth.
The output terminals of your circuit are just marked + and - and there's no indication of what they are to be used for. If you're bringing them outside the fully insulated circuitry and making them available externally, you MUST use an isolating transformer, as in the second circuit. Even then, there is potentially a very high voltage ACROSS the terminals, which is an electrocution hazard, but at least the actual terminals themselves are not live relative to mains earth.
The safety regulations are not put in place without good reason. You can, and will, electrocute yourself if you touch the negative or positive output terminal of your first circuit, if your body has a path to earth (which it usually does, more or less).