This Article explains how a lockup torque converter operates.
http://dnr.louisiana.gov/sec/execdiv/techasmt/ecep/auto/f/f.htm
Quoted from the above article.
"Once turbine speed is approximately 90% of impeller speed, the one-way clutch race spins on its own axis. At this point, the converter is said to be "coupled hydraulically." Under these conditions, up to 10% of the engine's output power could be lost to the torque converter's internal slippage. This accounts for most of the mpg difference between a standard and automatic transmission vehicle."
Notice they use the word "slippage" which you found funny.
Conditions for torque converter lockup are quoted.
"3. Under low engine vacuum, heavy part-throttle acceleration is an additional power demand which could result in the engine lugging. To prevent engine lugging, which could result in serious engine damage, a sensor determines if low manifold vacuum exists.
Typical lockup converters connect these sensors in a series creating a "string" arrangement. That is, if one sensor gives a "no" signal then the converter will not lockup. Therefore, for most converters to lockup, the following must be present:
a. Coolant must be at or above minimum temperature.
b. Transmission selector must be in drive if a non-overdrive vehicle or in "O" or "OD" overdrive if an overdrive vehicle.
c. Vehicle must be at or above minimum lockup speed.
d. Vehicle must be in a cruise or near cruise condition.
e. Transmission must have shifted into the top gear."
I have Owned 5 vehicles with automatic overdrive transmissions. All had/have lockup torque converters. They were/are all 4 speed automatics. In all cases when the OD is turned off the transmission drops to 3rd gear and essentially becomes a 3 speed transmission until the OD is turned on. No OD on top of the 4 speeds. I also have a Mazda 3 with a 4 speed sport transmission. It does not have an overdrive on top of the 4speeds.
Clifton