The oil separator is part of your pollution control system. Also called the breather box. It traps sludge (and other gunk) from the pollution control system and prevents it from reentering the engine.

Are you familiar with the famous Volvo flame trap? I'm not sure what the set-up is on the 6 cylinder engines, but on the 4 cylinder engines the flame trap is mounted above the oil separator. They are connected by a hose. The separator will fill up with sludge etc. on cars with high mileage. This will keep the engine from breathing correctly causing high crankcase pressure which can result in leaking engine seals. Possibly including the rear main seal.

BTW - Please disregard the above paragraph if you are already using synthetic motor oil as synthetic doesn't leave sludge or other deposits...:)

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Bessie - 95 855 GLT Sportwagon; 93 854 GLT; Inga - 90 244 DL 300k, gone but not forgotton