1) is uses 2 different spectrums of UV light and uses the creates a ratio based off the rates of absorbtion of the 2 UV spectrums to give a percent saturation based off of how much oxyhemoglobin absorbs vs deoxyhemoglobin absorbs.
2) You obtain 3 pieces of information from ABGs, acid/base status, ventilation (CO2) and oxygenation. However, when you look at what's more important PaO2 vs SaO2, it's actually SaO2 as the equation on oxygen carrying capacity is 1.34xSaO2xHgb + (0.003xPaO2). I don't get an ABG just to see what the PaO2 is when I have a reliable SaO2.
Just keep in mind it won't work well with CO (overestimated) or metHb (underestimated) nor does it work well if you don't get a good waveform (many reasons why this could be going on --> poor circulation, severely tachycardic patient to name a few).