...exactly. Scam-o-rama. Typicaly it's a resistor that fools the ECM into thinking the IAT is seeing a low temp., supposedly allowing more timing advance. The problem is if the temp is significantly higher than the ECM thinks then the timing is far too advanced and ping occures, defeating the original purpose by robbing your engine of power.
I've fooled with this on a couple of vehicles: turbo 2.2s and 5.9L magnum.
On the 2.2 I had a varistor (variable resistor) set up for drag racing purposes. It was a touchy motor and small changes made HUGE differences, too far 'cold' and pre-ignition was bad enough to send me from the strip with a blown head gasket (a 35 min drive on a good day)
On the 5.9 moving the IAT from the intake to the air filter box did not produce a noticable difference, but I suspect that the 'chip' mod may have, though it probably would have been negligable.
Sorry for the lenghty post.