Works just like cooling system radiator, with the notable exception that it is filled with transmission fluid.
While excessive transmission heat build-up may not be a huge issue in your Honda, it is quite a big deal with guys you see pulling huge boats and RVs behind pick-ups and SUVs. A transmission cooler is basicly extra long tubes connected to a small radiator that runs up to the front of the vehicle where fresh cool air can flow through the radiator.
Not only does transmission fluid lubricate it also disperses heat from the multitude of moving parts within a transmission. The more excessive heat you can disperse, the longer your transmission life will be...theoretically of course.
See, I wrote a nice explanation when I wanted to post
this 