The temperature readings are very accurate as the data is collected from a Digital Thermal Sensor (or DTS) which is located in each individual processing core, near the hottest part. This sensor is digital, which means it doesn't rely on an external circuit located on the motherboard to report temperature, its value is stored in a special register in the processor so any software can access and read it. This eliminates any inaccuracy that can be caused by external motherboard circuits and sensors and then different types of programs trying to read those sensors.
http://www.alcpu.com/CoreTemp/howitworks.html