Intercoolers are a heat exchanger, just like your radiator, designed to cool the intake charge of an engine after it has gone through the supercharger or turborcharger. There are two kinds, air to water and air to air, but both operate to cool the intake charge so that the engine can run more efficiently and has the potential to make more power. Here’s how they work.
An air to air intercooler looks much like a radiator, but with larger inlets and outlets than a typical radiator, and is generally mounted in front of the vehicles radiator behind the grill. Modern diesel pickup trucks have air to air intercoolers to cool the intake charge on these turbo diesel engines. The air to air intercooler works by sending the intake charge from the turbo, through the intercooler and out the other side and into the engine. While it is inside the intercooler, that air is cooled by the air going through the intercooler. Think of the air in the intercooler like the coolant in your radiator. The air flowing through your radiator cools the coolant inside your radiator. The intercooler works the same way, but is cooling the intake air instead of coolant.
And air to water intercooler works a little different. There are a few different styles of air to water intercoolers, and some mount inside an intake manifold, some inside a blower, and some inside a separate box. Regardless, the intake air charge is flowing around the outside of a heat exchanger, instead of flowing through the inside of it. Think of the intake air flowing through the fins like the air going through your radiator, but instead of hot engine coolant there is cold water in that radiator and it is making the air that blows through it cold. If you are able to make the water in your air to water intercooler as cold as possible, it can make the intake air passing through it very cold as well, which means big power. Air to water intercoolers have the capability of making a colder intake charge than air to air intercoolers, but they require lots more components that might make them less appropriate for some applications.
Below is video of Doug Cook from Motion Raceworks talking about air to water intercoolers and what you need to know to make your system perform at its best.