I actually asked the same question after I set up an MSI K7T-Turbo2 Motherboard with an Athlon XP 1600. I found that Cooler XP alters the voltages ever so slightly, but it gets the desired cooling effects through halting the CPU when necessary. Temperature wise it works! After leaving my system to idle all night I will normally wake to find the CPU temp at 27°C (roughly 78°F). That's an incredible temp.
Apparently there is a large debate as to whether running the Halt command actually increases your CPU's chance for failure and decreases the number of years it will run. One person estimated that it might decrease the CPUs life from 8 years to 6. If I'm still running an XP 1600 in 2008 then I've got a problem. So I wasn't too concerned with that possibility. I'm not even sure if it is true. At the same time, the program decreases the temp on the CPU from temps in the mid-40°s C to the upper 20s°C. It would be nice to hear more about the actually inner workings of the program, but I can attest that it gets the job done when it comes to cooling and I am happy using Cooler XP.