Most modern internal combustion engines are cooled by a closed circuit carrying liquid coolant through channels in the engine block, where the coolant absorbs heat, to a heat exchanger or radiator where the coolant releases heat into the air. Thus, while they are ultimately cooled by air, because of the liquid-coolant circuit they are known as water-cooled. In contrast, heat generated by an air-cooled engine is released directly into the air. Typically this is facilitated with metal fins covering the outside of the cylinders which increase the surface area that air can act on.
In all combustion engines, a great percentage of the heat generated (around 44%) escapes through the exhaust, not through either a liquid cooling system nor through the metal fins of an air-cooled engine (12%). About 8% of the heat energy finds its way into the oil, which although primarily meant for lubrication, also plays a role in heat dissipation via a cooler.
Many motorcycles use air-cooling for the sake of reducing weight and complexity. Few current production automobiles have air-cooled engines, but historically it was common for many high-volume vehicles. Examples of past air cooled road vehicles include:
Most aviation piston engines are air-cooled, including most of the engines currently (2005) manufactured by Lycoming and Continental and used by major manufacturers of light aircraft Cirrus, Cessna and so on. Notable exceptions have included the Allison V-1710 and Rolls-Royce series of (most well known, the Merlin V-1650) liquid-cooled V12 engines which powered P-51 Mustangs, Avro Lancasters, Hawker Hurricanes and Spitfires.
Other engine manufactures using air-cooled engine technology are ULPower and Jabiru, more active in the Light-Sport Aircraft (LSA) and ultralight aircraft market. Rotax uses a combination of air-cooled cylinders and liquid cooled cylinder heads.