On a Gen 1 there are three temperature sensors screwed into the block or thermostat housing. The sensors are resistors or thermistors and change resistance with changing temperature. One is the feed for the temp guage, another for the red idiot light, and the third for the ECU. The ECU reads the signal and determines when or if the turn the fan on.
Gen 2 has the thermostat in a different location, I know. I think this gives you the answer, though.