The MAX31855 is a thermocouple temperature measuring device where there is a small voltage at the end of the thermocouple which varies with temperature. The hot junction is a cable of two wires made from two dissimilar conductors connected at the end point. Whenever a conductor experiences a temperature gradient from one end of the conductor to the other, a voltage potential develops.
The implication of this effect is that thermocouples do not actually measure an absolute temperature; they only measure the temperature difference between two points, commonly known as the hot and cold junctions. Therefore, in order to determine the temperature at either end of a thermocouple, the exact temperature of the opposite end must be known.
The Cold Junction at the IC must be taken into account for accurate temperature readings. The internal temperature is used as the the cold junction for this device.