saturn comments on Procedural Knowledge Gaps - Less Wrong
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This is actually implementation dependent. Though the most common implementation of a thermostat is just an on-off switch for the heater, it is possible to have a heater with multiple settings and a thermostat that selects higher heat settings for greater temperature differentials.
Also, turning the thermostat up extra-high means that you don't have to go back and make the temperature higher if your initial selection wasn't warm enough.
Since about 50 years ago all but the lowest-end thermostats are designed to be "anticipators" — they shut off the heat before the requested temperature is reached, then gradually approach it with a lower duty cycle. More often than not, the installer doesn't bother to fine-tune this, in which case it can take a long time to reach equilibrium. Turning it a few degrees warmer than you actually want isn't a completely stupid idea.
(reference: http://en.wikipedia.org/wiki/Thermostat)
Thank you for reassuring me that I'm not crazy :)