Ok......So in an automatic transmission there is no mechanical link between the engine and tranny. The only link between engine and tranny is the fluid itself (without converter clutch).
Imagine for a second you set up two fans fasing each other, now imagine one of these fans is your engine and the other is your tranny. Now start the engine and rev it up a bit, fan starts spinning fast, which in-turn starts to spin the other fan. Now connect this other fan (tranny) to some gears and voila........work can be done.
A torque converter is basically two fans fasing each other, and using fluid instead of air.
Problem is that there is alot of heat created inside the converter, and it become inefficient because of the fluid coupling and the "slip" it allows.
The cure is to add a clutch inside that will lock the "fans" together at cruising speeds, or when you are trying to lay down some powa. This clutch now become a mechanical link, which means less power lost and less heat.
Of course there is much more going on inside a TC, but this should give you a basic idea and its about the best way I can think to describe it.
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