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It senses the oxygen content in the exhaust, and sends that to the ECU which uses that info to control the air to fuel ratio at a set level (like 14.7:1 for EPA engines when in closed loop operation).
Aftermarket 'wideband' O2 sensors can (with the proper tuner) actually auto tune your engine to a AFR that you select, after doing modifications to the engine, without needing a dyno tune.
A fuel management won't do anything to help where the EPA engine lives, because it is basically a closed loop system for all practical applications, and as such it will drive back to the same EPA mandated air fuel ratio (14.7:1) when it's running at other than low and wide open throttle positions.
You need to also use an O2 eliminator, or use a wideband O2 sensor and the aforementioned type of tuner with an auto tune feature/accessory, or other accessories for the tuner you select, that allow you to data log the wideband O2 sensor readings, so you can use that data to augment the maps to control at air fuel ratios to be what you want.
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