What does an oxygen sensor do? On an 88' 190E is it easy to replace? Where does it go?

It senses how much oxygen is in the exhaust. This tells the car if the engine is running rich or lean and then adjusts the air/fuel mixture accordingly.

I don't know exactly where yours is located but it should be somewhere in or near the exhaust manifold, look around near the catalytic converter too.

They are typically easy to replace, I've done it a few times on Ford's.

It is a cylindrical shape that is maybe a half inch in diameter and about 3 or 4 inches long.

Is your gas mileage really bad?

__________________
1987 300SDL 167k
1992 Volvo 740 140k
1990 Volvo 740 250k
1989 Volvo 240 269k

Anyone want to trade an old Volvo for an '87 300sdl?

It can fail in several ways....

overriching... = bad mpg.
overleaning... = stalling.

__________________
-Marty

1986 300E 220,000 miles+ transmission impossible
(Now waiting under a bridge in order to become one)

Reading your M103 duty cycle:
http://www.peachparts.com/shopforum/831799-post13.html
http://www.peachparts.com/shopforum/831807-post14.html