Thermal grease (also called CPU grease) is a thermally conductive, but usually electrically insulating compound, which is commonly used as an interface between heat sinks and heat sources (e.g., high-power semiconductor devices). The main role of Thermal Grease is to eliminate air gaps or spaces (which act as thermal insulator) from the interface area in order to maximize heat transfer.
As opposed to thermal adhesive, Thermal Grease does not add mechanical strength to the bond between heat source and heat sink. It will have to be coupled with a mechanical fixation mechanism such as screws, applying pressure between the two, spreading the thermal grease onto the heat source.
Promotes better heat conduction.
It fills in all those microscopic imperfections on the heatsink and CPU/GPU that can trap air in them and cause a loss in the heatsink’s performance.