This paper provides a comprehensive revision of the working principles and limitations of the mechanical limited-slip differential (LSD), a passive device used to improve traction capabilities and to extend the performance envelope of high-performance road cars, racing and rally cars. The LSD has been in use for decades. However, according to the authors’ experience, its impact on vehicle dynamics appears to be somewhat neglected in the literature and often misunderstood, especially in the semi-pro racing community. Current research on the subject is usually focused on side aspects and/or on modern control applications such as active differentials and torque-vectoring systems. These state-of-the-art technologies still rely on the same principles of the LSD, which should therefore be fully explained. The authors intend to fill this gap by starting with a comprehensive literature review. Then, an intuitive explanation of the impact of limited slip systems on vehicle behaviour is proposed with simple mathematical models and examples to integrate what seems to be missing. The peculiar shape of the torque-sensitive LSD working zone on the torque bias diagram is explained to an unprecedented level of detail. Real-world application examples are provided, including data recorded on a single-seater racecar integrated with examples based on a virtual model