The knot sensor detects knots as the yarn passes through it and stops the machine when necessary. The gap where the yarn runs through should be just slightly wider than the yarn so that the yarn can pass through without friction, but any knots will trigger the sensor. As such, a thinner yarn needs a smaller gap, and a coarser yarn needs a bigger gap.
Adjust the sensitivity of the sensor by turning the knot sensor wheel clockwise (narrower) and anti-clockwise (wider).