The Open Mind blog has an excellent explanation of how underground boreholes work in recording temperature changes over time (very differently from ice boreholes) (UPDATE: William says ice boreholes aren't different - see comments). They're very good at detecting whether past temperatures were above or below average, but are less specific as to when the variation occurred, and get still more less specific the further back you go in time.
I'll just repeat here a comment that I left there, that boreholes seem like something that could resolve whether the Little Ice Age, and possibly the Medieval Warm Period, were regional phenomenon or were more widespread. Since those issues are still unresolved, I assume there are complications to the technique.
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