An automatic transmission is an automobile gearbox that can change gear ratios automatically as the vehicle moves, thus freeing the driver from having to shift gears manually (similar but larger devices are also used for railroad locomotives).
Most cars sold in the United States since the 1950s have been equipped with an automatic transmission. This has, however, not been the case in Europe and much of the rest of the world. Automatic transmissions, particularly earlier ones, reduce fuel efficiency and power. Where fuel is expensive and, thus, engines generally smaller, these penalties are more burdensome. In recent years, automatic transmissions have significantly improved in their ability to support high fuel efficiency but manual transmissions are still generally more efficient.
A cut-away model of a torque converter - Most automatic transmissions have a set selection of possible gear ranges, often with a parking pawl feature that will lock the output shaft of the transmission.
However, some simple machines with limited speed ranges and/or fixed engine speeds only use a torque converter to provide a variable gearing of the engine to the wheels. Typical examples include forklift trucks and some modern lawn mowers.
Recently manufacturers have begun to make continuously variable transmissions commonly available (earlier models such as the Subaru Justy did not popularize CVT). These designs can change the ratios over a range rather than between set gear ratios. Even though CVTs have been used for decades in a few vehicles (e.g. DAF saloons and the Volvo 340 series that succeeded them, and later the Subaru Justy), the technology has recently gained greater acceptance among manufacturers and customers.

Automatic transmission modes

Conventionally, in order to select the mode, the driver would have to move a gear shift lever located on the steering column or on the floor next to him. In order to select gears/modes the driver must push a button in (called the shift lock button) or pull the handle (only on column mounted shifters) out. Some vehicles (like the Aston Martin DB9) position selector buttons for each mode on the cockpit instead, freeing up space on the central console. Vehicles conforming to US Government standards must have the modes ordered P-R-N-D-L (left to right, top to bottom, or clockwise).

Automatic Transmissions have various modes depending on the model and make of the transmission. Some of the common modes are:
Park (P) – This selection mechanically locks the transmission, restricting the car from moving in any direction. A pin prevents the transmission from moving forward (although wheels, depending on the drive train, can still spin freely), it is recommended to use the hand brake (or emergency brake) because this actually locks the wheels and prevents them from moving, and increases the life of the transmission and the park mechanism. A car should be allowed to come to a complete stop before setting transmission into park to prevent damage. Park is one of only two selections in which the car can be started. In some cars (notably those sold in the US), the driver must have the footbrake depressed before the transmission can be taken out of park.

Reverse (R) – This puts the car into the reverse gear, giving the ability for the car to drive backwards. In order for the driver to select reverse they must come to a complete stop, and push the shift lock button in and select reverse. Not coming to a complete stop can cause severe damage to the transmission. Many modern automatic gearboxes have a safety mechanism in place, which does to some extent prevent (but doesn't completely avoid) inadvertently putting the car in reverse when the vehicle is moving. This mechanism usually consists of a moveable physical barrier on either side of the Reverse position, and is electronically linked to the brake pedal, which needs to be pressed in order to allow putting the car in reverse.

Neutral/No gear (N) – This disconnects the transmission from the wheels so the car can move freely under its own weight. This is the only other selection in which the car can be started.

Drive (D) – This allows the car to move forward and accelerate through a range of gears. The number of gears a transmission has depends on the model, but they can commonly range from 3, 4 (the most common), 5, 6 (found in VW / Audi Direct Shift Gearbox), 7 (found in Mercedes 7G gearbox) and 8 in the new model of Lexus cars. Some cars when put into D will automatically lock the doors or turn on the Daytime Running Lamps.

As well as the above modes, there are also other modes dependant on the manufacturer and model. Some examples include;
D4 – In Honda and Acura automatics this mode is used commonly for highway use (as stated in the manual) and uses all 4 forward gears.
D3 – This is also found in Honda and Acura automatics and only uses the first 3 gears and according to the manual it is used for stop & go traffic such as city driving.
+ − and M – This is the manual selection of gears for automatics, such as Porsche's Tiptronic. The driver can shift up and down at their will, like in a semi-automatic transmission. This mode may be engaged either through a selector/position or by actually changing gear (e.g. tipping the gear-down paddle).
OverDrive ([D], OD, or a boxed D) - This mode is used in some transmissions (including late 1980s Chevrolet) to allow early Computer Controlled Transmissions to engage the Automatic Overdrive; in these transmissions, Drive (D) locks the Automatic Overdrive off, but is identical otherwise. OD in these cars engaged under steady speeds or low acceleration at 45mph; it would automatically come on at 65 under hard acceleration.
Second (2 or S) – This mode limits the transmission to the first two gears, or more commonly locks the transmission in second gear. This can be used to drive in adverse conditions such as snow and ice, as well as climbing or going down hills in the winter time.
First (1 or L) – This mode locks the transmission in first gear only. It will not accelerate through any gear range. This, like second, can be used during the winter season, or towing.

Hydraulic automatic transmissions
The predominant form of automatic transmission is hydraulically operated, using a fluid coupling or torque converter and a set of planetary gearsets to provide a range of torque multiplication.

Parts and operation
A hydraulic automatic transmission consists of the following parts:

• Fluid coupling or torque converter: A hydraulic device connecting the engine and the transmission. It takes the place of a mechanical clutch, allowing the engine to remain running at rest without stalling. A torque converter is a fluid coupling that also provides a variable amount of torque multiplication at low engine speeds, increasing "breakaway" acceleration.
• Planetary gearset: A compound planetary set whose bands and clutches are actuated by hydraulic servos controlled by the valve body, providing two or more gear ratios.
• Valve body: hydraulic control center that receives pressurised fluid from a main pump operated by the fluid coupling/torque converter. The pressure coming from this pump is regulated and used to run a network of spring-loaded valves, check balls and servo pistons. The valves use the pump pressure and the pressure from a centrifugal governor on the output side (as well as hydraulic signals from the range selector valves and the throttle valve or modulator) to control which ratio is selected on the gearset; as the car and engine change speed, the difference between the pressures changes, causing different sets of valves to open and close. The hydraulic pressure controlled by these valves drives the various clutch and brake band actuators, thereby controlling the operation of the planetary gearset to select the optimum gear ratio for the current operating conditions. However, in many modern automatic transmissions, the valves are controlled by electro-mechanical servos which are controlled by the Engine Management System or a separate transmission controller.
• Hydraulic & Lubricating Oil: called Automatic Transmission Fluid, or ATF, this component of the transmission provides lubrication, corrosion prevention, and a hydraulic medium to convey mechanical power. Primarily made from refined petroleum and processed to provide properties that promote smooth power transmission and increase service life, the ATF is one of the few parts of the automatic transmission that needs routine service as the vehicle ages.
  The multitude of parts, along with the complex design of the valve body, originally made hydraulic automatic transmissions much more complicated (and expensive) to build and repair than manual transmissions. In most cars (except US family, luxury, sport-utility vehicle, and minivan models) they have usually been extra-cost options for this reason. Mass manufacturing and decades of improvement have reduced this cost gap.