The o2 sensor is located under the car just behind the tranny bolted into the exhaust pipe.
Lambda is a term that comes into play when speaking of closed loop fuel injection. It is achieved when the O2 sensor is hot and the fuel mixture is close enough to 14.7:1 to allow the computer to constantly monitor and refine the fuel mixture.
What was done to your car was the o2 sensor was replaced then the fuel mixture was adjusted to get optimal smoothness. (I hope)
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