The sensor detects the target height by looking for the reflected light from two separate LEDs to be equal. The two LEDs are positioned such that they reflect light into the sensor at slightly different heights. This allows the sensor to be used most any bed surfaces.
It connects to the Duet family of controllers through a dedicated probe header.
For the advantages and disadvantages of various Z probes types see: Choosing a Z probe
For details on connecting the IR Sensor see Connecting a Z probe
For the full detail on DC42's IR sensor see his IR sensor web page.