The camera sensor is what captures light and along with the other electronics in your camera produces a photo. The sensor replaces the film.
Sensors record light on light sensitive pixels. Did you know that the word pixel is a Canadian invention. It stands for picture + element = pixel.
The most obvious thing to note about sensors is the size and the number of mega pixels on the sensor surface. The more pixels, the better quality of the photo. Other factors effecting the quality of photos are the size of the actual pixels on the sensor, the electronic processor of you camera, the quality of light falling on the scene and how bright the scene is.
To explain all this technical mumbo-jumbo into plain language, follow this link to Digital Photo School's story on sensor size.