. How does Arduino take input from different sensors and act on it?

The active solution requires a device called a multiplexer. This is basically a switch and it selects one of its inputs to route through to its output, so it can be used to connect your input pin to the output of one of the sensors. It requires an extra IO pin, though, so is pretty pointless as you could just use that IO pin as an input from the second sensor. It does mean, though, that both sensors can be active at once and you just select one to read the output from.