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Internal combustion engines are basically big gas powered air pumps. If you enlarge and/or smooth the passage the air takes as it travels through the engine, you will move more air, and make more horsepower. Intake systems direct the oxygen rich air and gas into the combustion chambers, where they are burned. The exhaust system funnels the spent gasses out the back of the car, and usually filters and muffles this gas.
An exhaust system tip: From the factory, exhaust systems are not built for top performance. With a better designed, high performance exhaust system passing gear will have a whole new meaning.