Volvo: S70 Running Hot, electric cooling fan, temp gauge

Question
My 1998 S70 is running hot. The temp gauge is near the red and the electric cooling fan starts to run non stop. I have had no issues prior, no water pump noise or leaks. So I figured the thermostat went bad. I replaced the thermostat and it is still doing the same thing. Any ideas on what could be wrong? What about that sensor (looks like some kind of sensor) right where the thermostat is.

Thanks!!!

Answer
Greg,
Put the scan tool on and read what the engine temp is. That will show what the control unit is getting as a signal. Use a temp gun at the t/stat housing and see if that matches the scan tool. Most times when a temp sensor is at fault there is a code, read the codes see if there is one. Replace sensor as needed. If the engine has really overheated it could have warped the cylinder head and now exhaust is getting into the cooling system and overheating occurs. Take the car in if you are still in doubt, before the engine is ruined due to overheating.