The differential or the "rear end" (as it's commonly called ) is the unit between the rear wheels. It transfers the power of the engine via the transmission to the rear wheels. Just as the transmission has gears inside, so does the differential. With a "Posi-Lock" style differential, both of the wheels turn at the same time and at the same rate. This is very helpful on dry or slick pavement, because of the increased traction - if both wheels are being driven together as opposed to only one, then you have twice the traction. But of course, when you turn a corner - one needs to rotate slower or your car would skip and not be able to turn. There is a "clutch assembly" mounted inside the differential which allows either wheel to "break free" and slow down for turns, but then for straight line driving they remain locked together. Unfortunately all Jaguars did not come with a "Posi-Lock" style differential. For more aggressive drivers - we highly recommend this conversion. In fact, we think it works so well - we suggest it for everyone.
The gears mounted inside the differential adjust the rate at which the wheels will turn given the speed of the drive shaft via the transmission. In other words, we can change the gears inside the differential to suit your driving habits. If most of your driving "fun is" quick starts against that "5.0 L Ford Mustang", then a 3.54:1 or larger gear is best for you because it offers lots of low end performance. But if you constantly seem to be blown off by that "Red Ferrari", then the 3.07:1 will give you the Hi end performance you're looking for. And by the way, you'll be smiling either way!
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SOLID STYLE (MK II)
The differential has lots of moving parts inside, therefore lots of bearings that need to be replaced, and of course the unit re-sealed. The bearings are all a good design but the seals were quite poor - lots of updates on re-sealing which at this point are standard procedure. If you keep your differential full of oil and change it every 2 years, you'll probably never have any problems - they're great or as we say, "bullet proof". We use a special additive (actually designed by General Motors) which allows the clutching system to work more efficiently on turns.