A 02 sensor is just that it measures 02, or rather oxygen content in the exhaust gasses, this sensor is usually termed lambda sensor by most but 02 sensor is more correct.
Lambda is signal(voltage) that it generates, a certain voltage is a certain lambda value, lambda 1 is the chemically correct ratio, called stoichiometric roughly 14.7:1, 14.7 parts of air to 1 part fuel, the ratio is actually a tad under but 14.7:1 good enough, 0.8 0.9 etc are comparisons to the chemically correct ratio.
tabetha