The system uses an Arduino board (~$30) and special sensors that are able to take measurements and report the data without additional hardware. This is done using a MicroLan or "One wire" network. It allows many sensors to be connected using one data line an a ground wire.
Old household telephone cables have 4 wires, only 2 of which are usually used, so you should be able to use the other 2 wires to communicate with the sensors, this allows you to have cheap sensors that plug into the phone jacks and send the data to an Arduino board plugged into another phone jack.
The Temperature sensors cost about $4USD. Humidity sensors are also available.
I was unable to get this to work in my house, I think this was because of the phone wires (we broke some when we removed the wallpaper), so I was not able to get the full system to work. I am posting an outline of the system, hopefully someone will find this interesting or useful.
Arduino UNO R3 board with DIP ATmega328P
DS18B20 Wire Digital Temperature Sensor IC
Step 1: Wire the sensor
I used a surface mount version because I had one on hand. There is a through hole version that is easier to work with.
The data sheet is here;
You can buy it here for $4.25: