From an article, nicely explained:
"A car thermostat has two separate but interrelated functions:
1. To bring the engine up to optimum operating temperature as quickly as possible; and
2. To maintain the engine at optimum operating temperature thereafter.
Discussion
An internal combustion engine operates best at high temperature, with the coolant in the cooling system typically above 80°C - 85 °C (176°F - 185 °F). Wear on the moving parts is reduced and thermal efficiency is increased. Lower temperatures result in increased fuel consumption and reduced engine life. Higher temperatures result in overheating with the danger of premature combustion of the fuel air mixture, also know as detonation or knocking, and damage to engine components.
To ensure that the engine reaches optimum operating temperature as quickly as possible, the thermostat restricts the flow of water from the engine to the radiator to virtually zero (a small flow is required so that the thermostat experiences changes to the water temperature as the engine warms up) until the engine reaches optimum temperature. The thermostat then opens up to allow coolant to flow through the radiator to prevent the temperature rising higher.
Once at optimum temperature, the thermostat controls the flow of coolant to the radiator so that the engine continues to operate at optimum temperature. Under peak load conditions, such as labouring slowly up a steep hill whilst heavily laden on a hot day, the thermostat will be approaching fully open because the engine will be producing near to maximum power while the velocity of air flow across the radiator is low. (The velocity of air flow across the radiator has a major effect on its ability to dissipate heat.) Conversely, when cruising fast downhill on a motorway on a cold night on a light throttle, the thermostat will be nearly closed because the engine is producing little power, and the radiator is able to dissipate much more heat than then engine is producing. Allowing too much flow of coolant to the radiator would result in the engine being over cooled and operating at lower than optimum temperature. A side effect of this would be that the passenger compartment heater would not be able to put out enough heat to keep the passengers warm.
The thermostat is therefore constantly moving throughout its range, responding to changes in vehicle operating load, speed and external temperature, to keep the engine at its optimum operating temperature. "
Cheers!