Here's a nice write-up from wiki. Read the whole thing and you'll understand why. For true enthusiasts, like us, viscous couplings suck. In a way, in a very simply put way, it is like taking a torque converter and putting it in the rear. I'll keep my open diff over the stock LSD any day. Clutch-types are for the most part the best, depending on manufacturer of course.
"The viscous type is generally simpler because it relies on hydrodynamic friction from fluids with high viscosity. Silicone-based oils are often used. Here, a cylindrical chamber of fluid filled with a stack of perforated discs rotates with the normal motion of the output shafts. The inside surface of the chamber is coupled to one of the driveshafts, and the outside coupled to the differential carrier. Half of the discs are connected to the inner, the other half to the outer, alternating inner/outer in the stack. Differential motion forces the interleaved discs to move through the fluid against each other. In some viscous couplings when speed is maintained the fluid will accumulate heat due to friction. This heat will cause the fluid to expand, and expand the coupler causing the discs to be pulled together resulting in a non-viscous plate to plate friction and a dramatic drop in speed difference. This is known as the hump phenomenon and it allows the side of the coupler to gently lock. In contrast to the mechanical type, the limiting action is much softer and more proportional to the slip, and so is easier to cope with for the average driver. New Process Gear used a viscous coupling of the Ferguson style in several of their transfer cases including those used in the AMC Eagle.
Viscous LSDs are less efficient than mechanical types, that is, they "lose" some power. In particular, any sustained load which overheats the silicone results in sudden permanent loss of the differential effect.[6] They do have the virtue of failing gracefully, reverting to semi-open differential behavior. Typically a visco-differential that has covered 60,000 miles (97,000 km) or more will be functioning largely as an open differential;[citation needed] this is a known weakness of the original Mazda MX-5 (a.k.a. Miata) sports car. The silicone oil is factory sealed in a separate chamber from the gear oil surrounding the rest of the differential. This is not serviceable; when the differential's behavior deteriorates, the VLSD center must be replaced." - wikipedia
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