Temperature
Temperature is represented by a notched semi-circle with an arrow pointing in it. In extremely hot or cold environments, the arrow will move in the respective direction, and if the arrow is in one of the colored rectangles, the player will take damage over time, ignoring Shields. The intensity of the damage over time is indicated by the color of the rectangle.
Equipping certain Armor and Accessories will increase the player's tolerance for extreme temperatures, increasing the temperature required to take damage and decreasing the damage taken in those temperatures. Additionally, some Mounts provide immunity to Heat, Cold, or both.
Watch your temp gauge while out exploring. Temps change at night.
Effect of biomes on temperature
Mount Obsidian is a level 2 hot zone. This means that you need at least heat resist level 2 to not take damage while out exploring.
The Astral Mountains are a level 2 cold zone. You need at least cold resist level 2 to not take damage while out exploring.
Heat/Cold Resistant Metal, refined metal, and pal metal armor provides level 2 heat or cold resistance. Fire pals increase the heat around you by one level, ice pals increase the cold around you by one level. You can use ice pals on mount obsidian to help keep you cool, and fire pals in the astral mountains to help keep you warm.
BUT - using a fire pal on Mount Obsidian or an ice pal in the Astral Mountains will cause you to need level 3 heat or cold resistance. You can get this extra boost from either a Thermal Undershirt (for cold) or a Heat Resistant Undershirt (for heat). The basic undershirts provide level 1 heat/cold resistance, stacking with your armor level. These can be purchased from any merchant.
Uncommon and Rare undershirts provide Level 2 and Level 3 heat/cold resistance, stacking with your armor, and can be found in high level dungeons. I got both of my +2 undershirts from the level 45 ice dungeons in the astral mountains.
Note that lava will still set you on fire and cause damage, but FAR less damage overall with Level 3 heat resistance. You'll take full lava damage with anything lower than level 3 heat resistance.
TLDR: if you want to use a fire pal on Mount Obsidian, wear at least a base heat resistant undershirt + armor with level 2 heat resistance. If you want to use an ice pal in the Astral Mountains or at night, wear at least a base thermal undershirt + armor with level 2 cold resistance.