These sensors use a solid-state technique to determine the temperature. … they use the fact as temperature increases, the votage across a diode increases at a known rate. By precisely amplifying the voltage change, it is easy to genereate an analog signal that is directly proportional to temperature. Because these sensors have no moving parts, they are precise, never wear out, don’t need calibration, work under many environmental conditions, and are consistant between sensors and readings. - Tutorial

References

• Using a Temp Sensor
• TMP36 and LM35 sensors