How does water temperature gauge work?

[BillLee/Chandler, TX]

I have one of the after-market water temperature gauges on my A. It uses a stiff cable-like connector between the water outlet neck, through the firewall at the junction box, and then to the gauge which is mounted under the dash.

Today I was driving and the water temperature was indicating just fine. I looked away for a minute or two and the gauge was suddenly reading WAY over on the too hot range. Yet the engine was running normally. In the past when i have over heated the engine, it was quite noticeable in the way it ran. When I got back to the garage I used an infrared thermometer and the radiator showed 190 at the top and 165 or there-about at the bottom. The water outlet was reading about 175 right under where the temperature gauge sensor is plugged in.

Under the hood I noticed fluid of some sort on the head at the back, under the junction box and coil. It looked oily. The ignition cable was wet with it as well as some on the head.

I am looking for knowledge!

Bill Lee