Flytest,
As a general rule, the rotational speed pickups are magnetic sensors that have wound coils and a central iron core. They are mounted so that the tip passes within a fraction of an inch (perhaps .040") from a gear that is mechanically tied to the main rotor. This gear has N teeth, so the waveform that the probe sends out is an N per revolution sine wave. The electronics are basically a counter circuit (digital these days, analog in older models) that converts the wave form into a number for the tach. There is usually a smothing term in the processing to account for slight changes in signal strength due to variations in the tooth position, where a closer passing tooth causes a much stronger signal. Development usually involves adjusting this processing, and also making gross adjustments of the probe to set its standoff distance for a clean strong signal. The probe is often a dual wound coil, so that two signals can be had (in Sikorsky's, we pass a different signal to each pilot, for some redundancy).
Here is one description of a phonic wheel system (it was the first hit of a Yahoo search for, strangely enough, "phonic wheel speed sensor"). Note that the software requires you to input the pulses per revolution and the wheel circumference, so that the software can know the frequency range and speed of the teeth, part of the smoothing processing:
http://www.evosport.com/product/imag...e/Velocity.pdf
Here is an even more technical report. Note that Anti-Lock Breaking Systems use these sensors to measure wheel speed differences:
http://www.cedrat.com/applications/P...%20wheel-2.pdf