The Sensor Tower is capable of detecting objects which a human eye cannot see due to psionic interference of their minds. They can also detect placed charges like Crazy Ivan's bombs, and spies who have disguised as your own troops. Additionally, a spotlight on top of the tower will mark enemy objects in its vicinity, making them easier targets to Soviet defenders.
A Sensor Tower detecting a Tsurugi via spotlight. Note the green arrow pointing down signifying the Tsurugi's defense has lowered.