LM35 is a temperature sensor with a 10mv/°C readout (1). Connecting a diode in series with the ground pin, raises the read out temperature by 60 degrees (2). This allows read out of lower temperatures, even with a system that has 0-5V power available. At zero degrees Celcius, the readout now is 0*10mv+0.6V (the drop across the diode). This is falsely interpreted as 60 degrees at first (2).
Subsequently, the readout offset was lowered by some 60 degrees, to make up for the 0.6V voltage drop across the diode. Readout (3) is now the same as in (1), but the voltage still is 0.6V, allowing for another 600mV drop, or temperatures down to 60 degrees Celcius below zero.