The torque converter uses hydraulic principles to transmit power smoothly between a driving member and a driven member. It contains a pump, turbine, and adjustable guide vanes within a housing filled with hydraulic fluid. Mechanical energy from the motor is converted to hydraulic energy by the pump and back to mechanical energy by the turbine to drive the output shaft. Adjusting the guide vanes regulates the fluid flow and allows the torque converter to adapt the output speed and torque automatically based on the load.