Imagine setting two fans down pointing at each other kind of close. Turn one on, and the air pressure from the first one will of course make the second one start spinning also. Now imaging the same deal where one fan is actually rotating inside of the other one - there is an inside set of vanes, and an outside set surrounding it. Same principle, just more efficient. Anyway, now instead of air, we are doing the same thing with fluid. So, instead of having a clutch, the outside set of vanes (the outside part of the torque converter) which is basically attached to your engine spins faster as you give it gas. At a certain point the inside set of vanes (which is attatched directly to the input shaft of the transmission) starts to turn as well. This way the power can be transmitted from the engine to the transmission in a seemless manner without stalling.
That's the power of fluid. Believe it or not, in the torque converter, there is no actual physical mechanical connection between the engine and the wheels.