transfers heat between the surface of the processor's heat spreader and the heatsink fan. it is necessary. the current AMD HSFs do not actually use a thermal pad, it is a thermal grease called shin-etsu i think. people often confuse it with a thermal pad because it sets pretty solidly after use. true thermal pads are made from paraffin waxes and other compounds that actually melt onto the cpu once used. to answer your first question, the shin-etsu is pre-applied in a square. all you have to do is clamp the HSF down into the retainer once you have installed the cpu and you're done