A torque converter uses fluid dynamics to multiply torque, allowing for smoother acceleration and better power transfer in automatic transmissions. In contrast, a mechanical clutch connects and disconnects the engine from the drivetrain without altering torque levels, maintaining the same input and output torque. The discussion highlights the importance of understanding these components in applications like gas turbines. The torque converter's design, including vanes and a stator, enables it to function effectively at varying speeds. Understanding these differences is crucial for optimizing performance in mechanical systems.