The surface of a CPU or a heatsink is never entirely flat; if you place a heatsink directly on a CPU, there will be tiny (invisible) gaps between the two. Since air conducts heat poorly, these gaps have a very negative effect on the heat transfer.

Therefore, an interface material with a high thermal conductivity is needed to fill these gaps, and thus improve heat conductivity.

When is the interface material especially important?

The more heat your CPU produces, the more important it is to use a good interface material. In other words, if you're overclocking, then you especially need it.

Another important thing: The thermal conductivity from a metal surface to another metal surface is better than from a ceramic surface to a metal surface. Therefore, if you have a "ceramic" CPU without the metal plate, then thermal compound is even more important.

What are popular thermal interface materials?

The most commonly used interface material in the electronics cooling area is thermal compound, a sticky paste applied directly on the heatsink or CPU. A good-quality thermal compound will provide the best possible performance. However, the disadvantage of thermal compound is that it is quite messy to handle, and therefore not suitable for mass production.

For this reason, most heatsink manufacturers ship their heatsinks with a "thermal pad", which is supposed to replace thermal compound. Cheap heatsinks usually come with silver/grey graphite pads. Graphite pads are inexpensive, but provide poor performance (unless a high pressure is applied to the pad, which is not the case when the CPU and heatsink are installed in a regular way). A graphite pad is better than no interface material at all, though.