The TEMP flag is turned on by sv_2mortal(). It indicates that the value stored in the SV is going to be freed by the next FREETMPS boundary anyways, so if you are assigning its value to another SV (via sv_setsv() and its friends), then you can simply steal the data (e.g. PV) from the mortal SV instead of allocating new memory and copying it.

There is normally no reason to worry about this in correctly written XS code, so the fact that you have to deal with this flag might indicate a problem in your code elsewhere.

Generally you should not keep references to mortal SVs beyond the next FREETMPS, which I think you may be doing here.