The clearances between metal engine parts can be as little is .0010". The oil keep the metal parts from touching. But even with oil between the metal parts, the spinning creates heat. In addition to lubricating the parts, the oil also carries the heat away. We know this stuff well.
Transmission fluid travels throughout the transmission to cool, clean and aid in shifting. These functions are reduced when heat attacks the additives in the fluid and oxidizes or burns them off.