Simple! The same thing that makes your brakes wear out.......friction and heat.
In an automatic transmission, the wearing parts include clutch plates, bands, bushings, bearings, sealing rings, thrust washers and other metal parts.....all wearing as a direct result of friction. The most crucial of those parts are the clutch plates. An automatic transmission does not use gears to propel the vehicle, it uses clutch plates. Each gear in an automatic transmission is comprised of three to six friction plates sandwiched between smooth steel reaction plates. When you move the gear selector to drive or reverse, a valve opens and extreme hydraulic pressure moves a piston, compressing clutch plates together, resulting in vehicle movement. Each time the transmission shifts, the computer opens another valve selecting the next gear and so on.
Each time the clutch plates are squeezed together (applied) they wear against the adjoining reaction plates. The more they are applied, the faster they wear. The more a vehicle is used for stop and go driving, the more frequent the clutch plates are applied....the faster they wear. The more weight a vehicle sets in motion, the harder the clutch plates have to work......the faster they wear. Conversely, the more highway type driving and lighter the vehicle.....the longer the clutches last.
The symptoms you will feel as your transmission ages depends on which part, or parts, wear out first. Since clutch plates are the parts that actually work the hardest and actually make your vehicle move, it is common to feel slipping between gears more frequently than other symptoms. A slip occurs when you feel your car or truck is not gaining the speed it should, based on how far you have depressed the gas pedal. Also, you will hear the engine grow louder and your RPM needle will go higher than normal while your speed is slower than normal. This symptom is the result of the friction lining on a set of clutches simply abrading off over the years and miles losing the ability to overcome the weight of the vehicle. This usually takes place between 120,000 and 170,000 miles. Highway driving usually helps your transmission live longer. As a matter of interest, 30 years ago transmissions usually wore out between 70,000 and 90,000 miles.