The differential is a gear assembly between axles that changes the direction of the torque from the transmission to the drive wheels by a 90 degree angle. There is a ring and pinion gear set which functions as the drive gears and there is also a set of smaller of side gears, or spider gears, that enable the two wheels to turn at slightly different speeds, which is a must for going around a curve.
Like most gear assemblies within a vehicle, the differential has gears that are lubricated with oil. If dirt or debris get into the fluid, then it could cause the differential bearings to fail. To prevent the differential from failing, be sure to change the differential fluid according to your manufacturer specifications.
The differential is covered by most manufacturer factory warranties under the drive systems warranty of the powertrain warranty section. There are extended auto warranties that will cover the cost of repairing a differential after the factory warranty expires.