How do oxygen (O2) sensors work and why are they important?

Oxygen sensors measure oxygen content in exhaust to determine air-fuel ratio. Narrowband sensors use zirconia ceramic that generates voltage based on oxygen difference between exhaust and reference air (rich mixture = high voltage ~0.9V, lean = low voltage ~0.1V). Wideband sensors provide linear output across the full range. O2 sensors enable closed-loop fuel control for optimal efficiency and emissions. Pre-catalyst sensors control fuel; post-catalyst sensors monitor catalyst efficiency.