You shouldn't have to "set it" to "in or out"....but the display may show a clock as well as one of the temps...you can press one of the buttons on the front to toggle the display to show both temps.

The way I have mine set up: The unit itself is resting inside the tub in the front corner of the cool side so I can read it without opening the tub. That's the "indoor" temperature. The probe is tucked under the warm-side hide, which is where the snake spends most of her time when she's on the warm side, so those are the temps I want to monitor. That's the "outdoor" temp.

Hope that helps some. The humidity is also measured at the unit itself, and not from the probe.