Two wire sensors are generally Variable Reluctance (VR) and three wire are Hall Effect or "logic sensor" (logic being in a state of either on or off). There is always a magnet involved in some way. Most VR sensors have the magnet inside of them and when a ferrous target passes them, they generate their own AC voltage that looks like a sine wave. MSD changed it up and made the magnet the moving target and put the ferrous core inside the sensor. Same exact concept, just a different way of doing it.
Hall Sensors are "powered" by either 5v or 12v depending on the sensor. Hall sensors work on a principle similar to VR sensors and also use a magnetic field. Many/most Hall sensor are "open collector" which is just a fancy way to say that they output a ground signal when triggered on. What the receiving electronics want to see is a square wave (usually at 5v or 12v amplitude). Well since a ground signal alone has no amplitude, there is a pull up resistor in the signal circuit that "pulls up" the signal's voltage to something like 5v or 12v in order to get the signal to transition from high to low as the sensor turns on and off. Some sensors have a pull up resistor already in them and output a square wave by default but this comes down to the specific sensor - check the sensor's spec sheet.
Won't be long and we'll be talking about noise cancellation techniques...