Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant.
A good liquid dielectric should have high dielectric strength, high thermal stability and inertness against the construction materials used, non-flammability and low toxicity, good heat transfer properties, and low cost.
Liquid dielectrics are self-healing; when an electric breakdown occurs, the discharge channel does not leave a permanent conductive trace in the fluid.
The electrical properties tend to be strongly influenced by dissolved gases (e.g. oxygen or carbon dioxide), dust, fibers, and especially ionic impurities and moisture.
[1] Some examples of dielectric liquids are transformer oil, perfluoroalkanes, and purified water.