Most of us are familiar with inductive detection circuits. There are standard devices used to detect a gear (toothed wheel).
These sensors are mounted in close proximity to the rotating gear. As each tooth moves by the coil and its permanent magnet pole-piece, a small current is induced into the coil. The gear speed can be measured easily and reliably.
There are coin validators (part of the mechanism in a vending machine) that check the denomination of the coin you dropped and whether it is real or counterfeit. The technology is similar. A coil wound on a permanent magnet core detects the coin's properties as it rolls by. Though the coin is (probably) not made of an iron alloy, eddy currents induced into the coin as it rolls by will produce a detectable counter-magnetic field.
There are inductive loops buried in the road to detect when vehicles drive over them.
These work reasonably well for detection of cars, OK (mostly) for motorcycles, and poorly for bicycles unless designed specifically for that purpose.
All these devices use simple circuitry to monitor the inductor. With the permanent magnet version described above, the AC voltage is amplified and used in subsequent processing circuitry. Other versions have an AC current applied to the inductor (referred to as an excitation current). Then metallic objects in proximity affect current flow in the inductor. The traffic loop detector uses this method.
For an inductive sensor, you could measure the inductance of the sensing coil and use that data to draw conclusions regarding what's in its vicinity. This process is generally more complex. (See: Z Meter on a Chip? Impedance Meter Phase Detectors and Z Meter on a Chip? Impedance Meter Bridge Circuits.) It doesn't work very well when the inductor's quality factor (Q) is low. Q indicates how pure the inductor is -- how much series or shunt resistance is associated with the inductor.
Texas Instruments has devised a way to measure inductance that simplifies this picture. It has released what it calls an inductance to digital converter. TI uses the acronym LDC, with "L" for loop instead of "I" for inductor. Presumably, this is so you don't think the company is selling insulation displacement connectors. (Don't confuse TI with Tyco.) The LDC1000 can be used in various proximity-sensing applications such as those described above.
The device is accurate enough that it can measure the inductance of a coiled spring through a large range of compression. That means you could use it as part of a weigh scale. The inductance is measured to within a fraction of a percentage point using a 24-bit delta-sigma ADC, so the inductance of a spring in compression over a small range actually is a quite practical and realistic application. Similarly, you could measure the amount of compression of a spring that's part of a vehicle's suspension. This could find use in an active suspension system -- the type that adjusts the spring force and the damping factor of the shock absorbers for various loads and road conditions.
The cost is low enough (less than $3 in small quantities) that it lends itself to some related rotary or slide applications. You could use it where you might otherwise use an A-quad-B encoder or potentiometer. You'd need to fabricate some additional metal parts, plus a shaft or slide mechanism assembly, for such applications.
TI also has an Eval board with a nice user's guide available. That should get you thinking about other uses. I may procure one of the Eval boards and try the following experiment.
Some of you probably know how railroad signaling systems work, so you can ignore this brief review. Track occupancy is detected by applying low-voltage DC or AC across insulated sections or blocks of track. With rolling stock present, the rails are shorted, a relay drops out, and appropriate signaling occurs. The more sophisticated systems don't simply look for that short (threshold detection). They actually measure the resistance and the rate of change of the resistance. This is useful for grade crossings -- the warning time can be adjusted depending on the train's speed.
I wonder what the inductance of a section of track is -- the approach circuit for a grade crossing. This is an oddly shaped inductor. It's a rectangle that is 4 feet, 8.5 inches wide and (in one example I used) 550 yards long. Exacerbating this is its low Q, complicated by parasitic capacitance to ground (literally earth, not circuit common) of varying conductivity. I estimate it's somewhere between 600μH and 1.5mH. If you could measure that inductor and monitor the slow changes that occur between rainy and dry weather and null them out, you might have a more reliable track occupancy detection system. I'll try it and see.
Do you have any applications for an IC like this? What comes to mind?