Knock sensor? What does it do?

I have a 91 GMC pickup with a 350 engine and auto tranny. I had my mechanic do a checkup of the underside of the truck and he said the knock sensor is broken (the wire terminal corroded off). I asked him what it's for. He said it senses a knock in the engine and does something to compensate.

He knows I am on a limited income and said I can change it myself if I want. He said I just need to drain the antifreeze because it screws into an antifreeze coolant port. Unscrew it, replace it, put wire on.

I agree this sounds pretty easy to do, but I cant understand how a thing inserted into a coolant path can sense a knock in the engine?

Can someone explain how this thing works.

Thanks

LM