Pre-calibrated silicon junction devices: LM34D (F) or LM35D (C) or LM335A(K) are very nice (10 mV per F or C or Kelvin). Cost about $1. It's cheap, accurate, small and calibrated. Its the best solution to this kind of problem, so long as you have an ADC channel available.
Non-calibrated silicon junction devices: LM34/35 type sensors can be constructed out of a diode or a transistor wired as a diode. You'd have to calibrate it (~ 1 mV per C?). Cost $.06. The second best solution. The difference in voltage drop across a diode at two known currents is also related to temperature and is independent of anything except the physical properties of the junction (ie - all silicon diodes give the same result). A practical circuit will involve a switchable current source and an amplifier. A quad package of low cost 324 opamps would very probably suffice for all the active electronics.
Thermistors: used in a voltage divider circuit. Cost about $.50 for the thermistor. You'd have to calibrate it and program a linearization routine. It you have to do it with a digital pin, thermistors are easier because you can read it as a capacitor charge time.
Characterizing a thermistor with the Steinhart-Hart equation
Thermocouple wire: (type T is easiest). You'd have to have an amplifier with a gain ~ 200. Cost of the wire $.01 for a 1 cm piece. Type K & N can stand 1000 deg C. in the right atmosphere and packaging. Use a lot of shielding as they are very sensitive to noise
Home made thermocouple: You can twist a copper and iron or other metal wire together to make a thermocouple. You'd have to calibrate it. It will rust.
Microchip PIC uP Temperature senseing
Ubicom SX uP Temperature sensing
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The method is based on the same principle which the band gap reference is based: The CHANGE in voltage across a silicon junction with a known change of current is a property solely [tm] of temperature and the properties of silicon.
For practicle purposes, this is: Delta V_junction = K.T.ln(Ihigh/Ilow) where T = absolute temperature. As Ihigh and Ilow are fixed this reduces to: Delta Vjn = K.T
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