On VW, the brake sensor is installed on the drivers-side inside brakepad. It is a simple wire imbedded into the pad itself. When the pad gets worn down far enough, this wire is sliced by the rotor. This illuminates the light on the dashboard.
The reason that specific pad is used for the sensor is because it tends to wear faster than any other pad on the vehicle. (if everything is wearing normally)
When you look for new pads, the parts-supplier will ask you if you need the pads with the sensors or not.
I would suggest you install real German pads (ATE, Zimmerman...etc) Also the German rotors are more resistant to rusting than some others.
Source: My own personal experience
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