Hi, will IR sensor work in sunlight? If no, what other sensor can I use for obstacle detection?
No IR does not really work well in bright sunlight, some people have got it right to work but its a big storie, for obstacle detection just use a ultrasonic sensor, but it also depends on what you are trying to avoid.
Author of this page says it's best to use a modulated signal
modulated signal means?
It means you turn the led on and off very quickly basically(just google modulate IR and arduino) but if you do that you still have to watch out that your IR receiver and IR transmitter does not get saturated by sunlight.
ramyar: modulated signal means?
Have a look at the attachment here, part 4.
Here we go again with the XY problem.
First explain what you mean by "obstacle detection"?
The most important thing about using optical (including IR) sensing, is collimation.
I do not even need to explain - read the link.