One of the early climate-skeptic arguments against the consensus view that the world is warming to a dangerous extent, was that the instrumental record of temperature was corrupted by the Urban Heat Island (UHI) effect. Wikpedia has a good summary and even RealClimate refers to their summary.
The argument was that a failure to correct for the (well-known) effect where urbanisation increases local temperatures led to exaggeration of the temperature trend measured by local weather stations and this, in turn, led to an overestimation of the average degree of warming across the world.
The climate-skeptic argument has been widely criticised. SkepticalScience dismisses it like this (and the link has further detail):
Scientists have been very careful to ensure that UHI is not influencing the temperature trends. To address this concern, they have compared the data from remote stations (sites that are nowhere near human activity) to more urban sites. Likewise, investigators have also looked at sites across rural and urban China, which has experienced rapid growth in urbanisation over the past 30 years and is therefore very likely to show UHI. The difference between ideal rural sites compared to urban sites in temperature trends has been very small...
But a recent paper by the climate-skeptic Anthony Watts and others (press release here, full draft paper pdf here) argues that, when properly classified by site-quality, there is a significant difference in the degree of warming reported between good and bad sites which leads to a significant exaggeration of the reported US temperature trend.
The results are summarised well by this picture showing the apparent differences between the reported warming of good versus bad sites:
The paper argues:
A reanalysis of U.S. surface station temperatures has been performed using the recently WMO-approved Siting Classification System devised by METEO-France’s Michel Leroy. The new siting classification more accurately characterizes the quality of the location in terms of monitoring long-term spatially representative surface temperature trends. The new analysis demonstrates that reported 1979-2008 U.S. temperature trends are spuriously doubled, with 92% of that over-estimation resulting from erroneous NOAA adjustments of well-sited stations upward.
So the question is: does the new paper from Watts et. al. convincingly suggest that, when sites recording actual temperatures are properly classified, the warming trend is lower in sites where the UHI is less significant? Is Watts' observation-based argument credible? Does it undermine previous rebuttals of the influence of UHI on the temperature record?
NB. Watts doesn't claim there is no warming, just that the extent of warming is lower when only good-quality temperature-recording sites are used. So the question is about the quality of the instrumental record not about whether warming is happening.