This is the famous line sensor (Tracker) from Sparkfun and Poloulo. It is based on the QRE1113 IR reflective sensor from Fairchild. The line sensor is digital so it can work with any micro-controller with no need for analog to digital converter. 

This digital sensor is fairly accurate in detecting lines drawn on background of different color. The principle of work is as follow: It allows the capacitor on the board to be charged and then measures how long it takes to discharge the capacitor. The more the light is reflected, the less time it takes to discharge the capacitor. 

Specifications

• Operating voltage: 5.0
• Supply current: 17 mA
• Optimal sensing distance: 3 mm
• Maximum sensing distance: 10 mm

Detailed BLDR tutorial for use of the QRE1113 line tracker with Arduino (wiring and code)

QRE1113 datasheet