IR Photo diode is used to detect the light rays reflected from an IR LED.  Photo diode is a reverse biased PN junction diode. When photo diode is exposed to light, electrical resistance across the diode decreases there by increasing the reverse current. If the photodiode is not exposed to light, resistance across the will be high .hence reverse current will be extremely small. This current is known as dark current. When light falls on photo diode, electrons acquire sufficient energy to break the covalent bond. Thus free electrons and holes are created. These free electrons will increase the reverse current. Basic circuit of an IR sensor using IR led and IR photo diode is shown below.  IR transmitter LED will be emitting IR rays continuously since it’s connected in forward biased state. When an obstacle is present, IR rays from LED gets reflected back and IR receiver will capture these rays. Now IR receiver will conduct, an active low output will be produced.