Here's a copy of an answer I gave in a similar post a few days ago. Hope it helps.
A gentleman named Peltier was experimenting- I believe with thermocouples, when he discovered that a juction of certain metals would cause a strange reaction to the flow of current. Instead of getting hot uniformly, one metal got hot and the other got cold. Todays peltier modules consist of hundreds of these junctions between two thermally conductive plates. They are a "heat pump" of sorts and can transfer heat from one side to the other with good efficiency.
The modern implementation is to place a "cold plate" (a piece of metal) between the cold side of the pelt module and the cpu die. The hot side of the pelt is thermally connected to a heatsink, or water block to carry the heat away from the pelt.
The biggest drawback of this assembly is the heat generation of the pelt itself. The heatsink/water system must be capable of carrying away the heat of the pelt in addition to any heat transferred from the cpu- much more than the cpu by itself.