by 
The Curious Bag
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It's difficult to say when the first shroud was installed on an automobile, but some suggest that Daimler experimented with one on his first cars. These simple ducts take advantage of an old principle in aerodynamics to increase airflow and cooling ability.
Location
Fan shrouds enclose all but the front and back of an electric cooling fan and usually attach directly to the radiator or radiator core support with fasteners around its perimeter.
Tip Vortices
All rotating blades produces small "tornadoes" of turbulence at the tips, which feed back through the blades and reduce airflow.
Ducting
A fan shroud works by isolating the fans outgoing air from the incoming, eliminating tip vortices and improving efficiency. This principle is employed in ducted fan model jet engines.
Mounting
Fan shrouds are mounted directly to the back of the radiator, and usually cover every inch of the surface that does not lie directly behind the fan blades.
Fan Positioning
The optimum position for an electric fan in a shroud is a couple of inches away from the radiator, to ensure that air flows evenly over the radiator's surface.
Source:
Rod and Custom Magazine: Fabricating A Fan Shroud At Home - Keeping Your Cool
The RC Plane Advisor: The Electric Ducted Fan
Resource:
Video: How to Remove a Fan Shroud
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