A very fine post at Eli’s blog for students of statistics, meteorology, and climate (like myself) titled:

Tom’s trick and experimental design

Excerpt:

This and the graph from Menne at the top shows that Karl’s trick is working. Although we only have seven to eight years of the CRN, that is enough to show that neighboring US HCN and CRN stations measure the same high frequency variations in temperature anomalies and it is unlikely that long term trends will differ. It is also a clear validation of GISSTemp’s assumption that measurements at locations considerable distance from each other are strongly correlated and that one can make use of that correlation to estimate temperature anomalies at locations which are not directly measured.
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Surveys can be corrected for population density if you know what the population density is, and area averages are easy to do. Over-representation of urban/suburban stations can thus be corrected for if one really wants to know the answer.