The temperatures sensor responds to the temperature surrounding its probe. The higher the temperature it senses, the more signal it sends out.
The temperature sensor determines termperature via the IC that is located on top of the board. It communicates via I2C with an MCU located on the bottom of the board. The MCU gets a temperature reading in Celcius, applies a hysteresis to the reading, then converts it to farenheit if necessary. The final determined temperature is converted to a number module readable analog value. Every 50mV on the output of the bitsnap represents a single degree in either Farenheit or Celcius. Since heat will conduct through the board itself, there are slots around around the temperature sensor which provide thermal relief from board conductivity.