Basically they do the same thing you see the welders do in the main menu background video.

Yes to make things work the way its supposed to. The sensors are meant to adjust the pistons so they can accommodate different sized builds.

Sensor on each welder?

The sensors go on the welder, either top or bottom. Adjust them to detect things close to the welders' tips and set them to retract the piston when detecting a block and extend the piston when not detecting a block.

Where do the sensor go?