torque converters amplify torque.. the engine spins a finned plate that has an opposing plate that is attached to the transmissions input shaft.. the medium in between is transmission fluid..
have you ever stirred a pot of water with a spoon? after you start turning it in a constant direction, the entire pot of water starts to spin, no? that is what the first plate is doing to the fluid in between the plates (one plate bolted to the engine shaft, the other to the transmission via coupler)..
at some point pretty quick, the spinning fluid causes the plate attached to the transmissions input shaft to start turning as well.. you can have the engine side spinning faster than the transmission side, which amplifies torque- at the cost of generating more heat.. when the two plate speeds match, a locking mechanism mechanically locks the two together- and the two spin at precisely the same speed- which transfers the torque of the engine directly to the transmission, and eliminates excessive heat.. free spinning? torque converter is unlocked... t/c locked? the engine plate and the transmission plate have mechanically locked together and are spinning at the same speed..
why do you need the two?
while 'unlocked', the t/c generates more torque.. the engine doesn't feel the full weight of the load.. while locked, the engine is doing ALL of the work.. it is advantageous to have the engine cheat when unlocked because you can keep the engine speed down and produce enough torque (spinning power) to do the work (horse power).. but it's going to cost you in terms of heat.. too much heat for too long will eat your seals and soft surfaces in your transmission..
while locked, the engine is transferring every revolution to the transmission, which spins it 1:1 (before being reduced through transmission gearing), which means less torque is being applied, but the engine speed is less and the heat is dramatically reduced..
there are a bunch of additional factors involved.. there is stall speed, and there is flash stall.. there are stator punches.. the dang torque converter is a floggin' amazing piece of engineering..
for your purposes, I think I've told you enough to decide what you need to select that would benefit you bestest...
if you're into performance, you'd want to hold the lowest gear and free spin the converter as long as you can.. if you're into hauling in varying grades, you would want to free spin the converter and amplify the torque (but not for an extended period; if the situation demanded that, you'd simply want to select a lower gear and adjsut speed accordingly).. if you're into economy under low to moderate load, you'd want to reach the t/c locked as soon as you can, so long as you're not overloading the engine attempting to maintain that speed (watch your EGT's yo!!)...
hope that helped...