It senses pressure. Mostly for low speed parking maneuvers when there is more strain on the pump/engine. Manufacturers have used a pressure switch to detect load for quite a while now. It's so the idle speed/low rpm can be re adjusted slightly to prevent engine stalling under higher steering demands. Similar to the ECU adjusting idle when the AC compressor puts a load on the engine.
How effective it is is debatable. The steering rack I installed on my 2001 neon didn't have the port for the switch, and I never had an issue. The pressure switch was in the steering rack, instead of the pump.