When a tire begins to spin freely, it is because there is not enough friction between the tire and the surface beneath. This lack of friction means there is no resistance – there is nothing for the tire to push and pull against to move your Mustang.
This is where the clutch discs come in. A clutch is a disc or plate covered in high-friction material, right? Well, we said that there is no wizard inside the differential, but there definitely is some mechanical magic going on.
There are thin discs on each side of the ring case. Those are the clutch discs. The spring device on top pushes the side gears up against the clutches which are attached to the cage.
In straight line driving, those side gears actually remain motionless. Only in a turn, or in a situation where one wheel is spinning faster than the other, do those side gears inside the cage spin. In the event of one wheel spinning faster than the other, the wheel must fight and overcome the clutches in order to spin at a different rate. As mentioned, in a corner, there is enough force present to slip the clutches.
However, recall that when the tire is spinning freely, there is no actual resistance against it, thereby there is very little force acting on the clutches. Certainly not enough force to cause them to slip. Due to this principal, the tractionless wheel can only spin as fast as the wheel WITH traction, because the clutches are locked together!
Therefore no torque is wasted by sending it to the tire without traction. Instead, it will be concentrated on the wheel with the most traction, helping you to get or keep your Pony moving.