Multiplying torque means the same thing as gear reduction. It simply means the input turns faster than the output; output speed is reduced and traded for torque. Most torque converters act somewhere around a 2:1 max gear reduction when they are slipping. That means the engine is allowed to rev high and spin fast without bogging, say 4000 RPM while the torque converter spins the input shaft of the transmission at 2000 RPM. Notice it's also variable as the input and output matches from 2:1 to 1:1.
Torque converter is different from straight turbine to turbine 1:1 fluid coupling in that it employs a stator system to capture the operating fluid and divert the centrifugal energy from the speed difference and turn into a torque difference. It helps to understand basic physics like force, distance, work, and power. Same concept as one person using a set of pulleys to lift a heavy object by themselves which they couldn't budge just trying to pick it up; trading distance for force.
A torque converter DOES multiply torque just like gears, that is the definition of "torque converter"; it's not simply just transferring some of the power straight through with slipping. That is the determining factor between basic fluid coupler and a torque converter; it's called a torque converter for a reason. Naturally of course it's not as efficient of a conversion as gears or pulleys since some of the work is lost heating the fluid, etc, but the advantage is you don't have to handle the special case of stalling.
It's also the reason automatics can get away with taller final drive gears with smaller engines; the torque converter acts like a gear reduction that cancels out the tallness of the gears when it's slipping (when accelerating) and then gets the low RPM cruise advantage of the taller gears when the torque converter is locked 1:1. On a manual you have to compromise with a gear tall enough to give good cruising RPM while also not bogging the engine when accelerating since the engine can't freely rev up with a manual.
Example: 2:1 final drive gear is to steep for a small engine with little torque with a manual; if you floor it at 2000 RPM, the engine won't do anything. 4:1 gives great acceleration but then you are at high RPM in 5th gear and get poor mileage. Lets compromise at 3:1. Automatic you can do 2:1. Because when the torque converter is slipping (accelerating, engine revving faster than car can move) it acts like a 2:1 gear combined with the 2:1 final drive to act like 4:1. When the car catches up to the engine and the torque converter is no longer slipping, the torque converter drops out of the picture at 1:1 and you're left with 2:1 for a nice low RPM cruise.
As to why they don't feel as powerful? In addition to the conversion losses in the torque converter, the automatic transmission uses power robbing planetary gear sets and an engine powered hydraulic pump. On a smaller engine that is taxed on power already, the power drain to operate the automatic transmission is a significant portion of the small engine's output. Lets say it takes 25 HP to operate the automatic transmission, you are going to notice that on a 100 HP engine compared to a manual. Now if you have 500 HP, it's insignificant. Same thing with the AC; you can physically feel it robbing power and slowing you down on a smaller engine when you turn on the AC, but hardly notice it with a powerful engine. Additionally, it takes a lot more to add extra gears to an automatic, so typically automatics will have less gears than a manual in the same car with the same engine and same top speed. The gears in a 4 speed AT will not be as close ratio as the gears in a 5 speed MT, thus you won't have the same acceleration.
Automatic cars can roast the tires and put you back in the seat just as well as a manual when they are set up right.