I set the setpoint to 80 deg and the differential to 2 deg.

Heat pad temp started at around 75 deg. Heated up to 80, then the heat relay de-energized. The cool relay was still de-energized.

The heat pad began to cool, when the unit read 78 deg, the heat relay kicked on.

Temperature = setpoint (80 deg) - heat relay off

Then I tried the cool circuit. The summary is this:

Temperature >= setpoint plus differential (82 deg) - cool relay on
Temperature