Transmission fluid runs through a car's transmission system to help it work smoothly and without error. Without the fluid, the transmission system would easily overheat, especially if the engine has to work hard. The fluid dissipates the heat before it can damage the engine, while reducing friction from other moving components. If something goes wrong and the transmission fluid itself over heats (temperatures above 400 degrees Fahrenheit can be especially dangerous) then the fluid can burn and quickly destroy the transmission system.
Shifting gears creates a large amount of extra friction in the car's transmission. Transmission fluid is designed to be able to deal with the heat this friction produces, but if the fluid already has to absorb the heat an engine is producing it may not be able to deal with rapidly changing gears. Drivers who change gears rapidly within a short amount of time may burn the transmission fluid.
The engine is a primary source of heat for transmission fluid. Normally, engines run in rpm ranges that the fluid can deal with easily. But if an engine has to work harder than normal--if the automobile is pulling a heavy load, for instance, or if it is going uphill on a steep slant--then the heat the engine produces can rapidly increase. If this heat gets too high, the fluid will not be able to circulate fast enough to disperse it and can burn.
Age affects all transmission fluid. Over time, the additives in the fluid that keep it from overheating break down, and the fluid begins to become dirty with the small particle contaminants that break off during transmission friction. The combination lowers the quality of the fluid considerably, making it highly vulnerable to heat problems the longer it goes without being replaced.
