Tony-

Your new friend didn't notice a difference BECAUSE the old one was bad. 
He probably isn't getting as good of gas mileage or engine performance
as he would if he had a good O2 sensor in there.  If he was driving
around for a while with the bad one, he probably doesn't even know what
he's missing out on.

As soon as the O2 sensor warms up (that's what the extra 2 wires are
for--they heat it up since it's not in the middle of the engine), the
ECU accepts it's signals and controls the fuel/air ratio based on those
signals.  Without a good signal (the ECU is suppose to ignore anything
out of range, either from a cold sensor, bad sensor or no sensor at
all), it uses a 'default' value which _I think_ is basically what a cold
engine would need for its ratio (since, presumably, it's only suppose to
have no good signal when it's first started and still cold).

I really don't think it does all that much for emissions, per se, except
to keep your engine running optimally which by default is good for the
air.

If you run into your friend again, you might tell him that he doesn't
have to spring the $120 or so for the Bosch O2 sensor.  A generic will
do just fine with a little cutting and splicing of the wires.

Tonya
87 Vanagon GL Wolfs
74 S. Beetle