You have to understand what causes ferromagnetism.
Ferromagnetism is due to the arrangement of delocalised electrons in the metal lattice. These electrons aren't fixed into the bonding layer of the metal atoms and are free to move around, these free moving electrons give metals their conductive and malleable properties. However it should be noted that not all metals display ferromagnetism, this is because in most metals these delocalised electrons arrange themselves in pairs so that their spins cancel each other out (electron spin causes an electron's magnetic moment). However in iron and some other ferromagnetic elements these electrons arrange themselves with their spins parallel to each other to maintain a more stable, lower energy state, this means that their spins don't cancel out and they will display ferromagnetism.
All ferromagnetic metals have a curie temperature which is the temperature where the material loses its ferromagnetic properties. This is due to the addition of thermal energy which overwhelms the energy lowering of ferromagnetic order, thus the relative spin directions of the electrons become chaotic and the material losses its ferromagnetism. In the case of iron it is 770 Celsius.
However at any point below this temperature there isn't enough thermal energy to maintain a this chaotic state ferromagnetic order kicks back in, this is what weo is talking about when he mentions decalescence. Since the ferromagnetic parallel spin arrangement is of lower energy, when the iron transitions (from its high energy chaotic state to a lower energy ferromagnetic state) energy is lost from the system into the environment, this is responsible for the brief rise in temperature and luminescence as the steel cools past its curie point.
Basically above 770 Celsius the delocalised electron arrangement of Iron is chaotic so the steel won't be ferromagnetic, below that the steel prefers to exist in a more stable, ferromagnetic state so it will stick to a magnet.
Hopefully you understood at least a little of that. We physics majors are notoriously bad at explaining ourselves and magnetism is an awfully tricky thing to wrap your head around.