The purpose of automatic transmission fluid is to lubricate, clean, cool and provide the hydraulic pressure necessary to ensure smooth operation of the vehicle's transmission. An automatic transmission creates a great deal of internal heat from friction. Under normal driving conditions, a transmission operates at 175 degrees which is the normal range most fluids are designed to operate. If the fluid temperature goes much higher, the life of the fluid begins to plummet.
The problem is even normal driving can push fluid temperatures well beyond the safe limits. At elevated operating temperatures, automatic transmission fluid oxidizes, turns from a bright red to brown. As heat destroys the fluids lubricating qualities and friction characteristics, varnish begins to form on the internal parts (such as the valves in the valve body) which interfere with the operation of the transmission. If the temperatures get above 250 degrees rubber seals begin to harden which leads to internal leaks and pressure loss. The transmission begins to slip and eventually the clutches burn out and the transmission calls it quits.