The turbo or turbocharger is basically two 'fans', a turbine and a compressor, linked by a shared axle. The turbine inlet receives exhaust gases from the engine exhaust manifold causing the turbine wheel to rotate which drives the compressor in turn compressing ambient air and forcing it into the air intake of the engine; this allows more fuel to enter the cylinder because the air is compressed.
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The purpose of a turbocharger is to improve upon the size-to-output efficiency of an engine by solving one of its cardinal limitations. A naturally aspirated automobile engine uses only the downward stroke of a piston to create an area of low pressure in order to draw air into the cylinder. Because the number of air and fuel molecules determine the potential energy available to force the piston down on the combustion stroke, and because of the relatively constant pressure of the atmosphere, there ultimately will be a limit to the amount of air and consequently fuel filling the combustion chamber. This ability to fill the cylinder with air is its volumetric efficiency. Because the turbocharger increases the pressure at the point where air is entering the cylinder, and the amount of air brought into the cylinder is largely a function of time and pressure, more air will be drawn in as pressure increases. The additional air makes it possible to add more fuel, increasing the power output of the engine. Also, the intake pressure can be controlled by a wastegate, which bleeds off excess boost from the turbocharger.
The application of a compressor to increase pressure at the point of cylinder air intake is often referred to as forced induction. Centrifugal superchargers operate in the same fashion as a turbo; however, the energy to spin the compressor is taken from the rotating output energy of the engine's crankshaft as opposed to exhaust gas. For this reason turbochargers are ideally more efficient, since their turbines are actually heat engines, converting some of the thermal energy from the exhaust gas that would otherwise be wasted, into useful work. Contrary to popular belief, this is not totally 'free energy', as it always creates some amount of exhaust backpressure which the engine must overcome. Superchargers use output energy from an engine to achieve a net gain, which must be provided from some of the engine's total output; either directly or from a separate smaller engine, perhaps electrically driven from the main engine's generator.
Turbocharging is very common on diesel engines in conventional automobiles, in trucks, locomotives, for marine and heavy machinery applications. In fact, for current automotive applications, non-turbocharged diesel engines are becoming increasingly rare. Diesels are particularly suitable for turbocharging for several reasons: