According to the reports (more than 120 complaints have been lodged to the NHTSA so far), the engine control module (ECM) may fail and send mixed signals to the transmission. Once the tranny starts to misbehave (noticed through rough or missed shifts), the ECM needs to immediately be serviced to avoid major transmission damage. Long story short, owners are miffed that Toyota has internally confirmed the issue (a TSB was issued to dealers in March of 2006), but has failed to notify consumers who are facing costly repair bills to replace transmissions when all many needed was a simple electronic module.
A spokesman for the NHTSA says the agency doesn't like to open investigations unless the problem is identified as a clear safety issue, but they "are watching it very closely." Toyota, meanwhile, is studying the issue to determine whether to extend its warranty on the parts in question.