In automotive industry, differential mechanism is one of the key components in vehicle driveline. The application of the differential enables wheels to corner at different rotational speed, and to distribute driving torque between each wheels at the same time. This article introduces theory and development of differential mechanism. Due to the mechanism constraints, the differential will cause wheel slipping and power loss when vehicle operating on low-friction road condition, like iced, muddy, mossy, hydroplaning terrains. Therefore, several types of differential mechanism are invented to overcome these disadvantages, namely clutch-based active/ passive limited-slip differential (LSD), locking differential, Torsen LSD, torque vectoring differential (TVD) and electronic differential system (EDS). The working principle and application of these types of LSD are introduced in this article.