Basically a gear tooth sensor counts gear teeth. You place the sensor about 1mm away from a ferrous (essentially iron or steel, not aluminum!) gear or sprocket and it detects the change in a magnetic field as the tooth goes by. The sensor is wired up to an interrupt on the robot controller and programmed to count the number of teeth that go by. This information and simlar information on other kit sensors can be found in the FRC Sensor Manual found
here.