The Glowies use a small microcontroller, but they are really quite simple in both parts and function. The core of the unit is a silicon diode used as a temperature sensor (actually, two of them). This is very simple, and is very well-understood application – and you can’t get much cheaper!
The electrical characteristics of a silicon diode changes depending on temperature. Specifically, the forward voltage will change depending on the temperature. It’s not much, but it’s enough to measure.
The microcontroller used (PIC12F675) has built-in Analog-to-Digital convertors. These are used to measure the forward voltage of two identical diodes. One of the diodes sticks out a little from the Glowie and serves as the main temperature sensor. The other diode is lightly insulated from the ambient temperature. This makes it slower to “catch up” to temperature changes. Temperature changes are detected by comparing the main sensor to the insulated one
Temperature sensing LED glowies: [Link]