The invention discloses a contactless power transmission system and an application thereof in an underground rotary steering mechanism, and relates to the technical field of oil drilling equipment. According to the power transmission system, energy transmission of power from a rotatable part to a non-rotatable part is finished through a separable rotary transformer, various disadvantages of contact energy transmission are avoided and the safety and the reliability of the system are greatly improved, so that the electricity demand of the underground rotary steering mechanism is met; and meanwhile, no signal interaction is needed between a primary circuit and a secondary circuit of the rotary transformer and the circuit complexity is greatly reduced. Furthermore, the system loss is reduced through a soft switching technology and a resonance technology and the transmission efficiency is improved.