Thanks much for the answers! I don't know what Fohn effect is but I assume it has to do with the slight change in lapse rate. The temperature being cooler in the mountains than in the surrounding valleys makes sense to me. If the temperature (or pressure) is lower, the altimeter will read higher and "cranking up" the altimeter setting will bring the indicated altitude back down to field elevation.
I have also heard that the wind blowing over the mountains may cause a lower pressure at a mountain airport and this would also be a factor.
Thanks again, you guys obviously had more ground school than me!