[curtis73]

In general, trannys shift when they need to based on a few hundred inputs from the computer. (or a few inputs from cables, vacuum sources, and speed in the case of older trannys) You are correct when you say that holding the tranny in a lower gear only permits it to shift up to the selected gear. Some trannys will go ahead and shift beyond what you have selected if the engine reaches a certain RPM.

As a rule of thumb, most automatics will operate normally in whatever gear you put them in, its just that they stop shifting up at the gear you've selected. There is probably no damage being done unless the engine is suffering from spinning at too high an RPM.

Most modern computer controlled trannys also have fail-safe stuff built in, so while shifting manually might add a bit more stress I wouldn't worry about it. Additional wear might be noticed at the CV joints or U-joints, but the tranny itself should be fine.