Community Forums:

This is a device to precisely tell the control module (computer) when the engine's crankshaft is in a certain position -- or, explained another way, as a certain point on the flywheel (usually) or front damper passes by the place where the pickup is mounted, it sends a signal to the module.
But you can see that the bottom line is that is provides a very accurate wealth of information, enabling timing of the ignition system, the fuel injection pulses, rpm, etc., as they relate to the stage (4-cycle) of all the cylinders, compared to a distributor pickup. The main drawback of the distribor pickup for this is that the distributor can be rotated on its mount (as we've all routinely done by adjusting the ignition timing on older cars), and so even though rpm info is still valid, the info regarding the position of the crankshaft becomes erroneous. In contrast, a crankshaft-based sensor can't be wrong unless you unbolt it from the crankshaft and rebolt it on the wrong orientation, not a likely happening.