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Oxygen sensor needs air from outside!

Dielectric Grease contains Silicon, and Silicon will contaminate and degrade the sensing element of the O2 sensor. That is why you should NOT use it on the connector, as well as many other chemicals. Lead will also damage the sensor. I imagine, since it take so little silicon to do the damage, that some in the connector could migrate along the wires and into the sensor. I'm sure blocking the reference Air is also a factor in the recommendation.

Only a few vehicles have "Wide Band" O2 sensors, they are expensive, they accurately measure the Air/Fuel Ratio through a band that is commonly used by engines.

Most vehicles have a "Switching" or "Narrow Band" O2 sensor, that are cheap, BUT they DO NOT accurately measure the Air/Fuel Ratio any point other than 14.7:1. The signal varies way to much with the temperature of the sensor and if you chart it, its a wild "S" curve that jumps from one limit to the other. The only thing it consistently hits, at any temperature, is the mid-voltage cross-over point is always 14.7:1, regardless of the temp. So the EFI system, brackets the Air/Fuel Ratio by switching back and forth between a tiny bit rich then lean, watching the sensor to see that it is showing the Air/Fuel Ratio switching back and forth as well.

This is why, most EFI systems have an "Open" and "Closed" Loop mode, during times when the engine needs an Air/Fuel ratio other than 14.7:1, like warm-up and Wide Open Throttle, the system goes into "Open" Loop mode, cutting the O2 sensor out and just determining Injector Pulse width by pre-set tables (often with a correction factors that it determined during closed loop mode). The times when the engine needs 14.7:1, its in "Closed" Loop mode, meaning it closes the feedback (correction) loop in the system and reads the O2 sensor response.

The O2 sensor also has to be above a min temp, which many now have a heater to get up to that temp faster, but if the O2 sensor is NOT above that temp, it won't be accurate and the EFI system often also goes into "Open" Loop mode for that as well.
 
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