Making an HR Diagram

The only things which can be observed for any given star are

From such observations an HR diagram is made:

Which is a plot of the luminosity of a star (y-axis) versus its temperature or color. This diagram is what the entire theory of stellar evolution rests on. The x-axis is reversed in the sense that higher temperaturs, (hotter stars) are on the left and cooler stars are on the right. The Y-axis is luminosity in units of solar luminosities

However, to get the luminosity of the star, one must determine the distance to that star using the method of stellar parallax.

Now when we are making a plot of surface temperature vs energy output (stellar luminosity) we are plotting the two external attributes of stars that we get from observation. We didn't have to go to the star to get this information.

Its important to get a volume limited sample if you want a representative sample of stars.