Information gleaned from a great many sources on the web and forum posts, compiled for easy reading ! Acknowledgements to all contributors recognising their input below :-)

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The Volvo 850 uses a Cycling Clutch System With Orifice Tube (CCOT).

The compressor runs until the temperature becomes so low there is a danger of ice forming in the system, at this point the compressor is switched off by the low pressure switch. The compressor remains off until the temperature rises to a preset temperature when the switch turns on the compressor again.
The compressor feeds hot compressed coolant gas to the condenser (located in front of the radiator) where it is cooled and becomes a liquid. It is then fed to the evaporator inside the cabin HVAC (Heater, Ventilation, Air Conditioning) unit. An expansion (orifice) tube is used to inject the compressed coolant into the evaporator where it boils and expands to become a cold gas which cools the evaporator core.

Coolant gas from the evaporator feeds back to an “accumulator” in the evaporator outlet. This accumulator is used primarily to collect any liquid refrigerant before it enters the compressor, where it would cause damage. It also contains a drying agent or desiccant to remove any moisture.

There is a high pressure switch wired in series with the compressor clutch on the rear of the compressor, whose purpose is to switch off the compressor to prevent damage if gas pressure becomes too high. There is also a pressure relief valve on the compressor as a failsafe.

The low pressure switch is located near the firewall at the back of the engine compartment. If there is insufficient gas pressure in the system this also prevents the compressor from starting to avoid damage due to no lubrication. For the A/C compressor to operate, the dash A/C switch, fan motor switch, and the low pressure switch must all be closed to activate the air conditioning relay, located behind the glove box.

The A/C dash switch contains a lamp which often fails. This may be replaced with a little care at negligible cost by dismantling the switch. (The RECIRC switch light does not usually fail as it instead uses a semiconductor LED. Such an LED could also be used as a replacement for the A/C lamp).

Temperature regulation and controls

There are two types of HVAC control fitted to the 850. The base and early models have manual damper controls activated by cables, except for the recirculation damper which is motor controlled.

The ECC (Electronic Climate Control) version operates the dampers in the HVAC box and the recirculation damper by electric motors which also have damper position feedback to the ECU. The recirculation damper motor on manual models is not interchangeable with that designed for the ECC unit and has a different connector. Other than this, both systems are similar. The information in this article refers to the manual system.

The input to the HVAC unit can be either fresh air from outside the car or recirculated air from the passenger cabin. The selection is made by a motor controlled damper which is located behind the glove box. The motor is activated by the dash RECIRC switch.

There is a common blower and duct work for both heating and air-conditioning purposes. Air passes from the fan through the evaporator into the heater and control box. If heat only is required the air conditioning compressor can be switched off by the dash A/C switch.

Cabin aircon temperature control is accomplished in the 850 primarily by reheating part of the cooled air in the heater core. Hence if the heater is faulty or has been removed there will be no control of air temperature inside the car - other than by opening or closing panel and cabin recirculation vents and by changing the speed of the fan motor. Under these conditions any real temperature control is almost impossible to achieve.

There is a variable “air mix” control which takes air from the chamber after the air conditioning evaporator, and feeds it to the center eye level vents where it mixes with air from the HVAC. The purpose of this is to provide the driver with cool air if required to prevent drowsiness. Ambient air from outside the car will be provided if both air conditioning and recirculation switches are OFF and the cabin fan operating.

Air Conditioning Performance

Most air conditioning problems are due to a loss of refrigerant. In systems that are in good condition, some refrigerant loss every year is considered normal. Owners should therefore not worry unduly if they have to top up with refrigerant periodically. However, high loss rates indicate a leak which needs to located and repaired.

So how can you tell if your aircon is working normally?
Run the car around for 10 minutes or so at the coolest setting of the HVAC and the fan at high speed.

The radiator electric fan should run continuously when the aircon is switched on.
Measure the temperature at the evaporator outlet or a dash vent. The temperature will vary depending on outside air temperature and humidity. Because of this, it is difficult to say exactly what evaporator outlet air temperature should be. Typically, with an outside air temperature of 70 degrees and 20% humidity, the evaporator outlet air temperature should be perhaps 35-45 degrees F. With 80+ degrees temperatures and 90% humidity, the temperature might be as high as 55-60 degrees F.

Check compressor cycling. The compressor will cycle periodically on cold days or when the fan speed is on low and the cabin is cool. In other words, whenever the evaporator core is in danger of freezing. On very hot and humid days it may not cycle at all. Fast cycling – every 5 seconds or so, indicates loss of coolant.
Next, feel the output line from the compressor to the condenser. (This line will be hot and can burn).

Check the condenser (this is the core at the front of the radiator – open the hood and you’re looking at it) by feeling up and down along the return bends for a temperature change. There should be a gradual change from hot to warm as you go from the top to the bottom. Any abrupt change indicates a restriction, and the condenser needs to be flushed out or replaced. Look for leaks on the face – they will show up as oily patches on the core.

Feel the line from the condenser outlet to the evaporator. It will be warm until it reaches the Orifice Tube (this is a visible restriction in the pipe) just before it enters the passenger cabin. At this point the tube will change to be cold and will sweat condensation.

The line from the evaporator outlet to the accumulator should be cold and sweating with condensation. If it is covered with thick frost, this might indicate that the evaporator is being flooded. This can be caused by an excess charge of refrigerant.
Look at the accumulator. The inlet and outlet lines should also be cold and both the same temperature. Any temperature difference or frost on the lines or tank are signs of a restriction. The tank should however be cold and sweating condensation.
The line to the compressor should also be cold to the touch, but the compressor itself should NOT sweat.

If all of these tests appear normal but the system does not seem cool enough, it is probable that the system needs topping up with refrigerant. Your system may have a leak.