Most of the heat in your engine comes from combustion. The friction of parts add to the heat and the oil and water work to keep it all cool. The reason that cooler water goes in the bottom of the engine and out the top is because when gas engines were first being made they didn't use water pumps. They used a completely gravity fed cooling system. The water expands and becomes lighter as it heats up - flows into the top of the radiator and starts to cool getting heavier than the hot water in the engine and flows out the bottom of the radiator in into the bottom of the engine where the process continues. This still works at 60 mph in a 66 Mustang - I know because I drove home after losing a fan belt and the temp stayed in the normal range as long as I kept the speed up. It doesn't stay cool at an idle though...for tht you need a fan and I suppose the pump helps too.
