What is the difference between npn and pnp proximity sensors?

No worries. The important thing here is that this module is simply reading a voltage from the sensor with reference to the ground of that sensor. This means that this module is always going to be a sinking device, and will be always be sinking small amounts of current from that sensor. This means, that your sensor is going to be powered externally and we will simply be reading the output voltage from it. Here is a link to a knowledgebase article about sinking and sourcing current. I hope this helps to clarify.