The earlier post is correct. It's your air pump. It takes hot exhaust gases from the exhaust manifold and preheats the catalytic converter so it won't pollute while the engine is cold. It was put on US model Volvos, probably at California's insistence, but not on any of the European ones. There is a check valve in the line between the airpump and the exhaust manifold, and it is this checkvalve that fails and ruins the airpump. Moisture condenses in the line when the engine is cold and the water in the line runs back down into the airpump, eventually flooding it and shorting things out. If you're lucky the pump will fail while the car is under warranty, like it did on my 97 855. The pump is removed from below and Volvo will stick it to you for around three hundred at least for the pump and I don't know what all for the check valve if your warranty has run out, but both have to be replaced, otherwise you will lose your airpump again. It is not critical to the operation of the engine and you can drive without changing it, but your check engine light will always be on and you won't know when something else is wrong unless you regularly check your codes . Dick