what exactly is a slipping transmission?
 

can anyone explain? my 126 each time it changes gears when driving (especially cold) it revs until it catches the next gear.

Automatics have several intenal wet clutches that engage in combinations to engage the various gears. Your "flare" issue could either be a worn clutch or a control system issue, which might be solved by an adjustment.

Looks like no one on this board is an auto trans expert. Neither am I, but I can give you a basic diagnosis.

You should probably seek out Merc transmission expert and see if he can diagnose and correct the problem with an adjustment. Otherwise, you might be looking at a trans overhaul not to far down the road.

Duke

Check your tranny fluid!! Most of the time it is due to low fluid level. I have a leak on my W124 and the tranny slips when the fluid is low. Make sure you check the fluid after driving for about 20 miles, or when it is pretty warmed up, and on level ground.