The Output Shaft Speed Sensor (OSS) provides the Powertrain Control Module (PCM) with a signal indicating the speed at which the transmission output shaft is rotating. These readings are used by the PCM to control the shift solenoids.
The solenoids carry fluid to various hydraulic circuits, in addition to changing the transmission gear ratio when necessary. The OSS Sensor can also control the speedometer reading, although this varies by manufacturer.
When DTC P0721 OBD2 is set, it is because the PCM has found a malfunction in the OSS Sensor circuit. This sensor is not working properly or is out of range.