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A torque converter does for an automatic transmission what a clutch does for a manual - couples the engine to the transmission input.
Assuming you know how a torque converter works (if not, check out http://howstuffworks.com), the lockup converter allows the engine and trans to be directly linked at certain engine/road speeds. When locked up, there is less loss (slipping) in the drivetrain, and you get a little more efficiency out of the system. Of course, you can't stay locked up all the time, or it's like coming to a stop with a manual trans and not stepping on the clutch pedal.
Thanks for the info. Why would the build sheet list this as a seperate component? All auto-Trans need this work. Since it was listed as a unique item, I thought there might be some other use for item, such as a different name for posi-traction.