Engine knock is also known as pre-ignition. It's when the gasoline in a cylinder detonates before it's supposed to. It can happen if you have fuel with too low an octane rating, if the engine is running hot or the outside temperature is very high, or if the engine is traveling under a heavy load like climbing a hill or accelerating hard. The knock sensor alerts the engine-management computer that knock is occurring, and the computer then retards the ignition timing to correct for it.
Sadly there is no easy way to test a knock sensor. They are a piezo-electric sensor, which can only be tested by exciting them with a frequency sweep (and typically high voltage). Each differently type of sensor has different frequency at which they will resonate.
By the picture you gave only other thing that I could can think of that would cause a "LEAN MIXTURE" or pre-ignition in your # 3 cylinder, and corrode your plug is carbon buildup, intake manifold vacuum leak, or sticking valves.
Maybe someone else has a different theory. Anyways good luck
Wednesday, November 5th, 2008 AT 2:44 PM