Two-way (oxidizing) converters burn HC and CO molecules with the assistance of a precious-metals catalyst. This process "converts" these harmful gasses into water vapor and carbon dioxide (CO2). It's important to understand that two-way converters are most effective when used with engines that have a lean air/fuel mix because this condition provides ample oxygen to "burn" the pollutants.
Three-way converters use two catalyst processes — reduction and oxidation —- and a sophisticated oxygen storage/engine control system to convert three harmful gasses - HC, CO and oxides of nitrogen (NOx). This is not an easy task: the catalyst chemistry required to clean up NOx is most effective with a rich air/fuel mix, whereas HC and CO reduction are most effective with a lean air/fuel bias. To operate properly, therefore, a three-way converter first must convert NOx (with a rich air/fuel bias), then HC and CO (with a lean bias).
Older three-way converters, called "three-way with air" or "three-way plus oxidation," perform this process by introducing additional oxygen between the reduction and oxidation stages to create a lean condition for the oxidation catalyst. (These converters are easily identified by their air tube.)
Modern three-way units, found on most vehicles manufactured since the late 1980s, rely on an advanced catalyst chemistry that stores and releases oxygen on a single substrate, and an oxygen monitoring and control system (utilizing one or more O2 sensors) that causes the engine to oscillate between lean and rich conditions. This oscillation, combined with the oxygen storage and release on the catalyst surface, enables the unit to convert all three harmful gasses with the same catalyst brick.
Today's "three-way" OBD II converters are just the last step in a highly sophisticated emissions control process. The chief component of this system is the engine itself, which, when operating properly, is significantly more efficient — and environmentally friendly — than its 1970s and 80s counterparts. Other leading components and systems playing important roles in reducing emissions in today's vehicles are engine sensors/controls, improved combustion chamber design and electronic fuel injection technology, each of which enhance the efficiency of the combustion process, resulting in fewer unburned pollutants.