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It allows the engine to run with the ignition timing as far advanced as possible. The computer will continue to advance the timing until the knock sensor detects pinging. At that point the computer retards the ignition timing just enough for the pinging to stop.
A knock sensor assures that you're getting as much power and fuel economy as is possible from your engine.
In the title of your post you asked what a knock sensor is. In the post itself you asked if your engine had an oxygen (O2) sensor. These are two different devices -- which one are you really interested in. An O2 sensor measure the oxygen content in the exhaust gas. A knock sensor detects detonation in the engine and retards ignition timing until the detonation goes away.
what silvertip says.
however even on a good day with no knock you wont see more than about 18*btdc, and less if the knock sensor detects knock.
O2 sensor simply sends the ECU information on avalible oxygen left in the exhaust stream.
and yes your 250 has both a knock sensor and an O2 sensor.
