Viscous couplings are not restricted to all-wheel-drive applications. Viscous (or fluid) couplings are used extensively in the world of mechanical engineering to transfer motion from one place to another. The torque converter is probably one of the most commonly used devices utilizing viscous couplings.
In a viscous coupling, a fluid is pumped using the powerplant. The pressurized fluid is then directed to a drive shaft. The pressure in the fluid causes the drive shaft to move, thus creating a coupling between the two.
Advantages of viscous couplings:
Fewer moving parts - less maintanance and higher reliability
Speed of powerplant is not directly tied to the conditions of the drive shaft (e.g. the powerplant can continue to run without stalling even if the drivetrain has stopped.)
Has the potential to temporarily increase output torque
Effective gear ratios can be easily changed by varying the nozzle diameter - Bernoulli's Principle
Disadvantages:
There is always some slip between the two shafts, resulting in reduced efficiency
Cannot be used for as many applications as gears can
It is more difficult to design and manufacture