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From Phidgets Support

Cold Junction Compensation and Self-heating

Thermocouples consist of two junctions, one where the thermocouple meets the Phidget and one where the two wires are welded together at the sensing end of the device. In simplified terms, a thermocouple works by detecting the temperature difference between these two junctions. As such, in order to measure the temperature at the sensing end we need to know the temperature where the thermocouple connects to the Phidget. To do so, there is an ambient temperature sensor on the board.

An important thing to note is that the ambient temperature sensor measures the temperature of the board and the air around it, though not specifically at the junction. Generally you can assume they are nearly the same temperature, however as the electronics heat up by being powered on there can be some small error introduced. This is exacerbated by having the board in an enclosed space where normal airflow is restricted thereby increasing the effect of self-heating. As a result we recommend that the board be left in as open and well ventilated/cooled a place as possible to minimize this error source.