What the Release of Liability does
Signing the title and handing over the keys doesn't end your connection to a car you sold — in the DMV's records, you're still the owner until you say otherwise. The Notice of Transfer and Release of Liability (REG 138) is how you say otherwise, and California law gives you 5 days from the sale to file it. When the form is properly completed and recorded, liability for parking and traffic violations — and civil litigation resulting from operation of the vehicle after the date of sale — becomes the responsibility of the new owner.
One thing it does not do: transfer the title. The REG 138 is a notice, not an application for transfer of ownership — your name comes off the vehicle's record when the new owner completes the transfer using the signed title you gave them.