An automatic transmission is a complex system that automatically changes gear ratios without driver input, offering a smoother driving experience compared to manual transmissions. It consists of various components including mechanical, hydraulic, electrical systems, and computer controls that work together to manage power transfer from the engine to the wheels. The document also details the differences between rear-wheel and front-wheel drive setups and emphasizes the advantages of automatic vehicles, particularly for older drivers due to their ease of use and lower collision risks.