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In a feedback system, the O2 sensor helps the Three way Catalyst perform more efficiently. The sensor is also used in fuel system management for computerized engine controls.
To begin, optimum fuel mixture (for performance and economy) for petroleum internal combustion engine is 14.7:1 (14.7 parts air to 1 part fuel)or stoichiomentry. The computer uses sensors try to maintain stoichiometry. Granted when the engine is cold,or requires full throttle, mixture is richer. The computer mainly uses coolant temp, throtle position and exhaust oxygen to obtain stoichiomentry. The O2 sensor ranges between 0-1 volt, with 450 millivolts being center. The computer commands more fuel to the engine when O2 sensor voltage drops below 450mv and subtracts fuel from the engine when sensor voltage is greater than 450mv. For a carbureted engine, the computer controls the metering rods to add and subtract fuel. In the case of fuel injection, the computer controls injector on time. We now add the 3 way catalytic converter into the mix. A 2 way cat converts hydrocarbons(HC) and carbon monoxide (CO) into carbon dioxide (CO2) and water (H2O), the byproducts of perfect combustion. The 3 way cat is different it that it controls NOx emissions. NOx is created by temperature. Therefore the cat must extinguish the combution process. So, back to the O2 sensor and the computer. If the O2 sensor works within an optimum range of 14.5:1 (slightly rich and very little to no O2) and 14.9:1 (slightly lean and some O2), then the engine can produce the O2 necessary to complete combustion in the cat by turning HC and CO to CO2 and H2O. The rich mixture which produces almost zero O2 is used by the cat to extinguish the combustion process in the cat to reduce NOx. A substrate material attracts O2 for combustion. That is a basic computerized engine theory.