JP57, the 90 degree deal is based on the need to equilibrate forces in any static body. If an object is not accelerating, then all forces acting on the object, or free body, are in equilibrium.
When you apply force to a torque wrench at 90 degrees to the work object, you are causing a couple things to happen. First, there is a translational force created parallel to your line of force. This force is opposed by an equal force from the cylinder stud, pushing back along the extension in this case. Secondly, you create a torque, or moment, about the extension. In order for the extension to not begin rotating in space, an equal and opposite moment is created at the other end, by the resisting torque of the nut.
Once the angle between the torque wrench and the extension deviates from 90 deg., then the translational force has two components - one is parallel to the extension, and the other perpendicular to it. It's that perpendicular force that creates another torque, in addition to the one you read on the wrench. Depending on on the configuration of the wrench & extension, this torque can be either additive or deductive to the indicated torque.