It’s the first one. I can tell you for sure that there is a huge temperature gradient inside the grill from the distance from the cooking grates to the inside of the lid. The lid thermometer is somewhere between 10-14" away from the grates, in most models.
That’s also why the upper rack is a “warming” rack and not a “cooking” rack (despite some manufacturers - coughweber - trying to include it in the cooking area total).