The Engine Oil Temperature (EOT) sensor, usually located on diesel engines, sends a voltage signal to the Powertrain Control Module (PCM), which is used to determine fuel quality, injection timing, and glow plug performance. This signal is also compared to other temperature sensors for certain diagnostics.
The EOT sensors receive a 5-volt reference from the PCM, and has a variable resistance depending on the engine oil temperature, then send a signal back to the PCM.
When the P0196 OBDII fault code is set, it is because the Powertrain Control Module detected a performance problem with the Engine Oil Temperature Sensor.