EDIT: haha, naunahan ako! I type too slow!
An LSD basically makes sure that both wheels are turning at roughly similar speeds.
For example, you're in mud. One tire is on dry ground, the other in mud.
With an open differential, as is common in most vans, cars and AUVs, all the power will go to the wheel with less resistance. The wheel in mud will spin hard, while the one on dry ground will stay motionless. In other words, if there's resistance on one side only, all the power goes to the other side.
With an LSD or limited slip differential, power will go back to the motionless wheel once the other wheel is turning at a certain speed. In other words, it limits the difference in wheel speed. But it doesn't make them turn at exactly the same speed, meaning that use on the road isn't as damaging to an LSD as to a locked differential.
With a locking differential, power will go to both wheel equally, no matter what. This is good for off-roading, but it will destroy your tires or drivetrain if you use it on the street, as OTEP has explained.
That's the simple explanation.
Unless you're in deep mud or on the beach (where you have almost zero traction), you don't really need LSD... or AWD.
Actually, you can even get stuck in an AWD vehicle in mud if it has no LSD or locking differentials... as in the case of the CRV AWD.





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