Here's the deal. Look at you heat sink. Looks pretty flat doesn't it. Well it's not really all that flat if you look at it microscopically. And the sink on the chip is not all that flat either. There are little gullies and hills where the metal is going to be separated. Where the metal touches metal the heat transfer is great. Where the metal just almost touches the heat transfer is less than perfect. By putting on the thermal grease you fill the gaps and "bridge" the heat transfer. It's still not perfect but much better than before. Where the pieces fit metal to metal, the grease is squeezed out.