Cold air intakes move the air filter outside of the engine compartment so that cooler air can be sucked into the engine for combustion. A cold air intake is installed outside the engine compartment, away from the heat created by the engine itself. That way, it can bring in cooler air from outside and direct it into the engine. Cooler air is denser, so it brings more oxygen into the combustion chamber, and that means more power.

Think of a factory air intake system as if you had a cold and your head is clogged and your breathing restricted. Now go running. You're not going to breathe very well, are you? A cold air intake is like the amazing medicine that allows your engine to finally "breathe."