There are two main chips on chipsets prior to Intel 6 series. The North Bridge and the South Bridge.
The North Bridge houses the memory controller, high speed PCIe lanes, and an IGP if one is present.
The South Bridge houses the PATA/SATA controllers, USB controllers, IIC controllers (for firmware access), RTC controller, PCI controllers (if present), FDD controller (if present), ISB controller (if present), and more.
The functions previously performed by the North Bridge have been completely integrated into the CPU as of the Sandybridge architecture, or into the CPU package as a separate chip with second generation Nehalem processors. As a result, the North Bridge is no longer found on modern motherboards and the South Bridge is more often called the PCH or Platform Controller Hub.
Since the North Bridge handles high bandwidth applications it gets quite a bit hotter than the South Bridge, but it does not get quite as hot as the CPU itself and often requires only a heat sink.
It's normal for heatsinks to get hot, that's what they're designed to do. What appears hot to us is actually fairly cool for most electronics. If your computer is running normally there's nothing to worry about.