The front diff, transmission, transfer case, rear diff (and rear e-locker if you have) all must be vented to allow for gas expansion as they get hot.

The front diff, transmission and transfer case have vents that are routed to the fire wall. They are not real high, but you won't get water in your case unless your are running through real high water/mud.

The rear diff doesn't have a breather. For some reason, Toyota just installed a 1-way valve on the rear diff which allows gases to expand out, but not to contract when cooled rapidly. When you are driving around and the rear differential gets hot from normal driving and you splash into some water the sudden chill from the cool water causes the case to rapidly cool and contract, building a vacuum in the rear differential.

This sudden quick cooling can create a strong enough vacuum that it sucks in water through the rear diff seals. The rear differential does NOT have to be underwater to have this happen - water just has to be up to the level of the seals (roughly about a 1' deep if I remember correctly, I didn't measure). Obviously, a little bit of water in the rear differential is gonna cause some serious problems if it stays there for long!

This is not the sort of thing that happens every time you splash your rear diff. I drove my '07 through some deep water (about 15") many years ago without the rear diff breather mod and had no problem. Eventually though, it WILL happen and it COULD happen the very 1st time. The rear diff mod eliminates the 1 way valve and vents the rear diff to a higher point.

Oddly enough, Toyota did put a proper vent on the e-locker actuator on rear diffs that are so equipped and that is run up higher to the under side of the frame cross member. If you are back there and running the vent for the diff you may as well tie the e-locker vent in as well.

David