What you are experiencing is the torque converter locking and unlocking. In most automatic transmissions built within the last 20 or so years the torque converter has a lockup feature to eliminate power losses. The lockup feature will usually engage when you are in top gear and are at a steady road speed. When it locks up, you will notice that the RPM will decrease, and it will feel like another shift.

When the torque converter is locked up and you accelerate moderately, the first thing that will happen is the torque converter will unlock. That's what you're probably feeling when you are thinking you've felt the first downshift. Then if you accelerate even harder, such as pushing it to the floor, the transmission will downshift to third, second, or first, depending on the road speed.

You may also notice that the torque converter will lock and unlock at other times. For example, on a lot of GM vehicles such as my Blazer, if you lift your foot off the accelerator, the torque converter will stay locked. But when you put your foot back on the accelerator after having had it lifted off, the torque converter will momentarily unlock and then lock back up again. I assume this is to avoid having the vehicle jerk too much in response to the throttle.

Amost no modern day transmission will remain in "true"(***) O/D with the torque converter's lockup clutch disengaged. But what you may be experiencing is the torque converter lock up clutch engaged, or not, in third gear. Provided the engine is pulling at a constant rate (uphill, heavy load)the lockup clutch may be engaged even in third gear.

You will often notice, briefly, two RPM ranges as the transmission upshifts into or down from O/D as the downshift into third or upshift into O/D is not always exactly simultaneous with the lockup (dis)engaging.

Obviously the torque converter can be effective in providing torque multiplication in non-O/D gear ratios for extra pulling power, or it can be in lockup to increase fuel economy.

Some of the newer transmissions, Toyota and Lexus 5-speeds for instance, will sometimes even engage the lockup clutch in third gear.

1st, 2nd, 3rd, 3rd w/lockup, 4th, 4th w/lockup, and finally 5th/O/D.

*** True O/D means the transmission output shaft is actually turning faster than the engine RPM, 1:1.3 to 1:1.7. If the torque converter is left in this "loop" its RPM loss factor would result in an additional increase in engine RPM defeating the very idea of O/D, reducing engine pumping and frictional loses in order to increase fuel economy and reduce emissions.

Thanks for the A/T education.
More questions...
"Some of the newer transmissions, Toyota and Lexus 5-speeds for instance, will sometimes even engage the lockup clutch in third gear.

1st, 2nd, 3rd, 3rd w/lockup, 4th, 4th w/lockup, and finally 5th/O/D."

Would there be a lockup clutch in 5th/O/D in the above example? If not, why not?

Also, theoretically and practically, O/D can be acheived in 4th gear (of 5-spd A/T) or 3rd gear (of 4-spd A/T) as well, right?

Whenever the torque converter locks/unlocks, does it increase the A/T oil temp?

In O/D, "true" O/D, (5th gear in my example) the lockup clutch is ALWAYS engaged. The lockup clutch might be engaged in lower, non-O/D, gears to eliminate the torque converter losses and thereby the additional ATF heating provided no significant level of drive torque is desired.

The torque converter has two uses, it will actually multiply the torque provided to it by the engine and that is highly desireable for acceleration, low, moderate or rapid. Since it is designed to not couple very much torque at low engine RPMs it prevents the engine from stalling when the throttle is closed and the vehicle is stopped or moving slowly.

The latter aspect is what makes the torque converter virtually useless in O/D. To get the very best fuel economy one wants the engine to run at the very lowest RPM that will still generate enough torque to keep the vehicle moving at a given speed.

Since one of the requirements for a torque converter is to not couple very much torque at low engine revs it cannot be used efficiently in O/D.

Actually there are a few situations where the 4L60E transmission in my Blazer will not be locked in overdrive. One of them is when the transmission is cold. It will stay unlocked until it warms up to help the transmission warm up faster. It will also unlock in the situation I described above -- getting back on the throttle after just having your foot lifted off of it. If you are just accelerating gradually, it will lock back up quickly, but if you accelerate harder, it will stay unlocked until the speed stabilizes.

The transmission will run warmer if the torque converter is not locked up because there is greater power loss, and where there is power loss, there is heat generated. The process of locking and unlocking the torque converter is electrically actuated, so there would be little or no heat generated simply by the process of locking and unlocking it.

The torque converter lockup feature is the main reason why automatic transmissions today usually get almost the same fuel economy as manual transmission models of the same vehicle, and in some instances the automatics do better than the manuals. When power is going through an unlocked torque converter, it's being transferred through a fluid -- there is no direct mechanical connection. Automatic transmissions used to work this way all the time, as there was no lockup clutch. Once the torque converter locks up, the power is no longer being transferred through a fluid. There is a direct mechanical link just as you have in a manual transmission with the clutch fully released.

Whenever the torque converter locks/unlocks, does it increase the A/T oil temp?

When a TC locks up it will decrease the temp of the fluid.

"4-speed A/T but acts like 5-speed, how?"

You have a 4 speed transmission with a torque converter lock-up clutch. The normal shift pattern from standstill to road speed is: 1st, 2nd, 3rd, 4th, and 4th with lockup. A downshift to climb a hill or to pass may drop back to 3rd gear and unlock, and then as speed rises and engine rpm increases, shift to 4th and when engine demand deceases, the converter clutch locks again. The shift to 4th and lockup may be very close together. There may be other combinations controlled by the engine management computer. Sensor inputs used are manifold vacuum, manifold absolute vacuum, engine speed, throttle position, and the current state of the transmission (gear and lockup).

On these transmission, often 3rd gear is straight through and 4th is Over Drive (output shaft turns faster than the input shaft, in the neighborhood of 1.1 times).