The differential is a special gear box located between the drive wheels of your vehicle. It allows the drive wheels to turn at different speeds, as they must when turning a corner. Over time, high operating temperatures can cause the lubricating fluid in the differential to break down, developing a gummy texture that doesn't properly lubricate the gears. Replacing the fluid can help you avoid premature wear on the gears in the differential, and can even help reduce wear on drive-wheel tires.
The old differential fluid is removed and replaced with new lubricating fluid based on your vehicle manufacturer's recommendations.