The purposes of this paper are to formulate active constrained layer (ACL) damping treatments through a variational approach, to study the work-energy relation of ACL, and to identify damping mechanisms of ACL treatments. Application of the extended Hamilton principle to ACL results in the equations of motion of ACL and the charge equation of electrostatics for the piezoelectric constraining layer. The work-energy equation together with the charge equation shows that the power dissipated through the active damping is the product of the electric field and the axial velocity of the piezoelectric constraining layer at the boundaries. This unique feature suggests that a self-sensing and actuating piezoelectric constraining layer may be an appropriate design in dissipating vibration energy without causing instability. To identify the damping mechanisms, a sensitivity analysis shows that the effectiveness of ACL damping primarily depends on the active and passive damping forces transmitted to the vibrating structure through the viscoelastic layer. The active damping force transmitted depends on the controller transfer function as well as a system parameter, termed active damping sensitivity factor, which depends entirely on the configuration of the passive constrained layer and the sensor. Finally, numerical results on ACL beams are obtained to illustrate the theoretical predictions above.