I am using the Fairchild sensor, looks like the same one.
If you look back in the posts, you will see a wiring digram for this. Basically the transmitter is wired to a 5 volt supply thorugh a current limiting resistor. This shines down and then reflects back to the receiver.
The diagram shown ( and I am very sorry, but I have forgotten who submitted it, although I enclose a copy here) shows on the input a pull up resistor. The inputs lines to the computer already have pull up resistors, and two proved too much, so I removed it and the sensor works very well. It is mounted above the lathe chuck mounting plate (which I painted matt black) the reflector was from my grand-daughters "stick on" shiny things, and I picked one that was like a small mirror (about 6mm by 6 mm).
I picked off the power supply from my stepper motor drive cards (24 volt) I used a 5 volt regulator on a small piece of circuit card. This is quite adequate and saves any other input to my box of tricks. The regulator runs up to 1 amp, so there is plenty in hand for other sensors or applications.
I found the sensor very sensitive to being the correct distance from the reflector (although if you study it you can see why) - it has to be at 90 o to the spindle, and the beam has to go down the transmitter, then bounce back up the receiver.
Once it is installed and working it is faultless. I have several others ( I think I got four) and I am thinking a replacing my limit/home switches with them, if I can figure out how to mounted them. I think they will be a lot less susceptible to swarf and other little metals which short the terminals of my micro switches.
Jim