It is not reading the temp under the hood. It is attached to the underside of the passenger side mirror, so it is reading whatever heat is radiating up from whatever surface you are parked on.
The gravel road in front of my house has a very steep incline, and I have seen (and heard) many 4WD trucks refuse to use 4WD for some reason. They absolutely destroy my road. I use my Auto AWD every time I go home.
I had Yokohama Geolandar A/T G015 on my 2005 Silverado, and absolutely loved them. I will replace my factory Goodyears with Geolandars as soon as I can.