This sensor is essentially a reed switch, encased in an ABS plastic shell. Normally the reed is 'open' (no connection between the two wires). The other half is a magnet. When the magnet is less than 13mm (0.5") away, the reed switch closes. They're often used to detect when a door or drawer is open, which is why they have mounting tabs and screws.
More information is available on the website of Sparkfun.
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