We’re glad you asked.
A Sachs (Fichtel & Sachs, or F&S) Torpedo Automatic is a two-speed internally geared hub. It’s like a Bendix kick-back, but German, and you don’t have to kick back. It changes gears automatically at a preset speed.
At a certain speed, governed by a tiny spring, centrifugal force kicks out two brass “wings” inside the hub, and they engage the overdrive. About halfway across an intersection (7 to 10 mph), the high gear will kick in by itself, and you’ll suddenly be pedaling harder and going faster. It’s pretty perfect.
The hub is incredibly cool, incredibly heavy, and really fun to ride. For me, the only downside is the coaster brake.
The low gear is the direct drive (1:1), which means that when you’re cranking up a hill, you aren’t running through the gears. Everything’s locked together and you aren’t wasting any power on the transmission.
The 1:1 low gear is why Bendix Blue-band kickback hubs are the most desirable ones. The Red and Yellow band Bendix hubs have high-gear as the direct drive. The Sachs hubs are regarded as better-built, more durable, and with a better coaster brake than the Bendix hubs.
Speaking of which, similar hubs are the aforementioned Bendix kickbacks, Sachs Duomatic kick back hubs (like this Automatic, but you backpedal to change gears), and the new Sturmey-Archer (Sunrace) S2C. The SA S2C is the bargain deal, since you can get one for ~$65 brand new, and these Torpedos cost ~$160 shipped from Germany.
As far as I know, the Sachs Automatic is the only two-speed hub ever invented that will shift for you.
Sprockets are the widely available three-notch ones used on Shimano and Sturmey-Archer hub gears for the last million years. New ones run $8-$15, and can be ordered from your local bike shop.
For more information on this, and internal gear hubs in general, visit the Hubstripping site. If you have a Duomatic or Automatic that needs parts, email hansen auf scheunenfun.de. He provided a replacement driving ring for this hub.