A couple of slight oversimplifications there, Chris
chriscolleman said:
When idling along and with power to spare you actually don't need all that nice fresh air to burn the limited amount of fuel you're injecting.
So they reroute some of the exhaust gasses, mix them with the fresh intake air and give the exhaust gasses a secondary burning.
This results in more environmentally friendly engines causing less harmfull exhaust gasses.
The last part is true but your description is not quite right. There are 2 sources of "bad" emissions - products originating from the air and products from the fuel. Air is mostly nitrogen, which is fairly inert but in a hot combustion process it reacts/burns with oxygen and forms NOx gases, which are much worse greenhouses gases than CO2, for example. The fuel provides carbon which reacts to form carbon monoxide and carbon dioxide, plus unburnt carbon particles known as particulates (the black stuff in diesel smoke).
The "secondary" burning of the exhaust gases doesn't achieve that much because most of the exhaust gas consists of fully combusted products. What happens is that there is much less oxygen in the exhaust gas (for obvious reasons) so in the EGRecycle this reduces the combustion temperature because there is less oxygen in the fuel-air mix. Lower temperatures mean less NOx formation, which is is a
good thing. Of course lower temperatures mean lower combustion efficiency, which means lower power output and a less complete burn of the fuel, which is a bad thing. So the EGR process also helps burn partly combusted fuel that is recycled to reduce fuel-generated pollutants and particulates, so the theory goes.
Kind of a vicious circle though - you use EGR to reduce NOx but lower O2 feed into the engine means an increase of other pollutants, which means you
have to recycle these in an attempt to fully burn these pollutants or Mr EU gets upset. But EGR only recycles part of the total exhaust volume, so you're pumping out partly burnt fuel (more so than a non-EGR engine!) but your NOx emissions are slightly reduced.
Good compromise? I'm not so sure. There are much more efficient solutions out there. EGR is NOT the diesel's friend IMHO - it requires a lot of compromises on the engine design.
chriscolleman said:
Why does your modern day engine like the EGR valve to be working.
Well think of it as a fast working thermostat.
Using warmer exhaust gasses mixed with cold intake air is another way of keeping your engine at optimum combustion temperature when needed.
Huh? Thermostat? Optimum combustion temperature is HOT but of course engine tolerances and metal properties limit how hot this can sensibly go. As mentioned previously, EGR reduces the combustion temperature because it reduces the O2 content of the fuel-air charge, so it is the opposite of optimum. Your engine is kept at optimum
operating temp by the water-cooling system. Remember a diesel is a compression ignition system, so the fuel-air mix has to be compressed to make the gas hot enough to burn (anyone remember the Ideal Gas Law?
technically Charles's Law 
) If the charge doesn't get hot enough, it doesn't burn. The heat comes from compression, not the engine temperature or the temperature of the feed gases, be they fresh air or exhaust gases.
Sorry if this is the uber-geek explanation but I wanted to clarify to avoid people misunderstanding what this is about.
Cheers,
