In this case, in normal conditions, all power is transferred to just one axle. One part of the viscous coupling is connected to the driving axle, another part is connected to the driven axle. When driving wheels slip, viscous coupling locks and torque is transferred to the other axle. This is an automatic all wheel drive system.
Figure: Viscous coupling
Figure: Viscous coupling (2) location near the rear differential on VW Golf Mk3 (5KB)
Figure: Volkswagen's viscous coupling parts (37KB)
The disadvantage of a viscous coupling is that it engages too slowly and allows for excessive wheelspin before transferring torque to another wheels. This is especially critical in automatic all wheel drive systems - when cornering under acceleration, the rear end is engaged with a slight delay, causing sudden change in the car's behaviour fron understeer to oversteer. Also, when taking-off in sand, front wheels can become bogged down before all wheel drive is engaged.
In an attempt to reduce the coupling's activation time, VW Golf MkII Syncro always transfers 5% of torque to rear wheels (this is achieved by rear driveshaft rotating slower than front driveshaft in normal conditions, causing viscous fluid warm-up and slight solidification).
At the same time, pre-tensioning the coupling too much leads to undesireable transmission wind-up and makes the system too sensitive to uneven tread wear on front and rear tires. This is why Volvo first reduced the pre-tensioning in 2000 and then replaced the viscous coupling with Haldex clutch on their all wheel drive vehicles in model year 2003 (Volvo s60 has Haldex since 2002).