What is an oxygen sensor?

An automotive oxygen sensor, also known as an O2 sensor, is a small sensor inserted into the exhaust system of a petrol engine to measure the concentration of oxygen remaining in the exhaust gas to allow an electronic control unit to control the efficiency of the combustion process in the engine. In most modern automobiles, these sensors are attached to the engine’s exhaust manifold to determine whether the mixture of air and gasoline going into the engine is rich (too much fuel) or lean (too little fuel).
This information is sent to the engine management ECU computer, which adjusts the mixture to give the engine the best possible fuel economy and lowest possible exhaust emissions. Failure of these sensors, either through normal aging or the use of leaded fuels, can lead to damage of an automobile’s catalytic converter and expensive repairs.
The downside of oxygen sensors is that they defeat many fuel saving technologies. If the engine burns too lean from any modifications, the sensor detects that the exhaust is too lean. It then sends the signal to cause the injectors to enrich the mixture by supplying more fuel. This causes the air-fuel mixture to stay within the stoichiometric ratio of 14.7:1 on a typical vehicle.
There are many ways to overcome this efficiency defeating mechanism. Several companies manufacture a device that can be inserted inline with the sensor and tricks the voltage signals into thinking it is within normal parameters. Therefore, any modification for cleaner burning will not be defeated by the oxygen sensor.
This self-defeating mechanism is why some legitimate fuel saving technologies actually cause a loss in gas mileage.

What is an EGR valve?

Exhaust gas recirculation (EGR) is NOx (nitrogen oxide and nitrogen dioxide) reduction technique used in most gasoline and diesel engines. In a typical automotive engine, 5 to 15 percent of the exhaust gas is routed back to the intake as EGR (thus comprising 5 to 15 percent of the mixture entering the cylinders). The maximum quantity is limited by the requirement of the mixure to sustain a contiguous flame front during the combustion event; excessive EGR in an engine can cause misfires and partial burns. Although EGR does measurably slow combustion, this can largely be compensated for by advancing spark timing. Contrary to popular belief, EGR actually increases the efficiency of gasoline engines via several mechanisms. Recirculation is usually achieved by piping a route from the exhaust manifold to the inlet manifold, which is called external EGR. A control valve (EGR valve) within the circuit regulates and times the gas flow. Some engine designs perform EGR by trapping exhaust gas within the cylinder by not fully expelling it during the exhaust stroke, which is called internal EGR.