Answer: To understand what differential fluid does, one must understand a vehicle’s differential. Depending on what type of vehicle you have, front-wheel drive, rear-wheel drive, or all-wheel drive, your differential will be located at the front of your vehicle; rear of your vehicle; or in the front, center and the rear of your vehicle respectively. The differential is the last stop for your engine’s power before it is transferred to your wheels. The differential is required to allow your wheels to turn at different speeds. When your vehicle is negotiating a turn, each of your wheels travels a different route and distance. The two inside wheels of a turn travel a shorter distance than the outside wheels. Your front and rear wheels also travel a different distance. Now, remember that equation back in science class: Speed is equal to Distance divided by Time? Well, using that equation, plus knowing that your vehicle’s inside wheels travel a shorter distance than your vehicle’s outside wheels travel during a turn, we know that your vehicle’s inside wheels travel at a lower speed than your outside wheels during the turn. It is your vehicle’s differential that controls the different paths and speeds of the inside and outside wheels during turns. The differential fluid is used to lubricate and cool the gears and shafts in your vehicle’s differential. The fluid is required to keep the parts lubricated, therefore, running smoothly, and also, to reduce the heat produced by the friction of the moving parts.Differential fluid service involves draining all of the old fluid and replacing it with new differential fluid.