The way it was explained to me (very simply, but enough to get the concept) is this:
1) First, you must consider that the thrust generated from a jet engine is a direct result of an increase in temp through that engine. i.e. the difference between the inlet temp (actual or assumed) and the MAX ITT.
2) Second, the engine has a max ITT, and it may be considered constant.
3) Therefore, at max power (read max ITT), the most thrust (the biggest difference between the temp into the engine and that expelled) will be generated at the lowest inlet temp.
By telling the thrust computer that the inlet temp at take off is hotter than actual, your really telling it to generate less thrust, as the difference between the max ITT (constant) and the intake temp is now less.
Because you'll be taking off with less power, your max take off weight may have to be limited to ensure adequate climb performance.