Air-cooled engines rely on the circulation of air directly over hot parts of the engine to cool them.
Most modern internal combustion engines are cooled by a closed circuit carrying liquid coolant through channels in the engine block and cylinder head, where the coolant absorbs heat, to a heat exchanger or radiator where the coolant releases heat into the air (or raw water, in the case of marine engines). Thus, while they are not ultimately cooled by the liquid, 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. (Direct Cooled Engine) Typically this is facilitated with metal fins covering the outside of the Cylinder Head and cylinders which increase the surface area that air can act on. Air may be force fed with the use of a fan and shroud to achieve efficient cooling with high volumes of air or simply by natural air flow with well designed and angled fins.
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.
Water cooling is a method of heat removal from components and industrial equipment. As opposed to air cooling, water is used as the heat conductor. Water cooling is commonly used for cooling automobile internal combustion engines and large industrial facilities such as steam electric power plants, hydroelectric generators, petroleum refineries and chemical plants. Other uses include cooling the barrels of machine guns, cooling of lubricant oil in pumps; for cooling purposes in heat exchangers; cooling products from tanks or columns, and recently, cooling of various major components inside high-end personal computers. The main mechanism for water cooling is convective heat transfer.