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In its most common (transmissive) application mode, a sensor device is placed on a thin part of the patient's body, usually a fingertip or earlobe, or in the case of an infant, across a foot. The device passes two wavelengths of light through the body part to a photodetector. It measures the changing absorbance at each of the wavelengths, allowing it to determine the absorbances due to the pulsing arterial blood alone, excluding venous blood, skin, bone, muscle, fat, and (in most cases) nail polish.
Reflectance pulse oximetry may be used as an alternative to transmissive pulse oximetery described above. This method does not require a thin section of the person's body and is therefore well suited to more universal application such as the feet, forehead and chest, but it also has some limitations. Vasodilation and pooling of venous blood in the head due to compromised venous return to the heart, as occurs with congenital cyanotic heart disease patients, or in patients in the Trendelenburg position, can cause a combination of arterial and venous pulsations in the forehead region and lead to spurious SpO2 (Saturation of peripheral oxygen) results.
In 1935, Karl Matthes (German physician 1905–1962) developed the first 2-wavelength ear O2 saturation meter with red and green filters (later switched to red and infrared filters). His meter was the first device to measure O2 saturation.
The original oximeter was made by Glenn Allan Millikan in the 1940s. In 1949 Wood added a pressure capsule to squeeze blood out of ear to obtain zero setting in an effort to obtain absolute O2 saturation value when blood was readmitted. The concept is similar to today's conventional pulse oximetry but was hard to implement because of unstable photocells and light sources. This method is not used clinically. In 1964 Shaw assembled the first absolute reading ear oximeter by using eight wavelengths of light. Commercialized by Hewlett-Packard, its use was limited to pulmonary functions and sleep laboratories due to cost and size.
Pulse oximetry was developed in 1972, by Takuo Aoyagi and Michio Kishi, bioengineers, at Nihon Kohden using the ratio of red to infrared light absorption of pulsating components at the measuring site. Susumu Nakajima, a surgeon, and his associates first tested the device in patients, reporting it in 1975. It was commercialized by Biox in 1981 and Nellcor in 1983. Biox was founded in 1979, and introduced the first pulse oximeter to commercial distribution in 1981. Biox initially focused on respiratory care, but when the company discovered that their pulse oximeters were being used in operating rooms to monitor oxygen levels, Biox expanded its marketing resources to focus on operating rooms in late 1982. A competitor, Nellcor (now part of Covidien, Ltd.), began to compete with Biox for the U.S. operating room market in 1983. Prior to the introduction of pulse oximetry, a patient's oxygenation could only be determined by arterial blood gas, a single-point measurement that takes several minutes for sample collection and processing by a laboratory. In the absence of oxygenation, damage to the brain starts within 5 minutes with brain death ensuing within another 10–15 minutes. The worldwide market for pulse oximetry is over a billion dollars. With the introduction of pulse oximetry, a non-invasive, continuous measure of patient's oxygenation was possible, revolutionizing the practice of anesthesia and greatly improving patient safety. Prior to its introduction, studies in anesthesia journals estimated U.S. patient mortality as a consequence of undetected hypoxemia at 2,000 to 10,000 deaths per year, with no known estimate of patient morbidity.
By 1987, the standard of care for the administration of a general anesthetic in the U.S. included pulse oximetry. From the operating room, the use of pulse oximetry rapidly spread throughout the hospital, first to the recovery room, and then into the various intensive care units. Pulse oximetry was of particular value in the neonatal unit where the patients do not thrive with inadequate oxygenation, but too much oxygen and fluctuations in oxygen concentration can lead to vision impairment or blindness from retinopathy of prematurity (ROP). Furthermore, obtaining an arterial blood gas from a neonatal patient is painful to the patient and a major cause of neonatal anemia. Motion artifact can be a significant limitation to pulse oximetry monitoring resulting in frequent false alarms and loss of data. The reason for this is that during motion and low peripheral perfusion, many pulse oximeters cannot distinguish between pulsating arterial blood and moving venous blood, leading to underestimation of oxygen saturation. Early studies of pulse oximetry performance during subject motion made clear the vulnerabilities of conventional pulse oximetry technologies to motion artifact. In 1995, Masimo introduced Signal Extraction Technology (SET) that could measure accurately during patient motion and low perfusion by separating the arterial signal from the venous and other signals. Since then, pulse oximetry manufacturers have developed new algorithms to reduce some false alarms during motion such as extending averaging times or freezing values on the screen, but they do not claim to measure changing conditions during motion and low perfusion. So, there are still important differences in performance of pulse oximeters during challenging conditions.
In 2004, a jury found that Nellcor infringed several Masimo patents related to measure-through motion and low perfusion signal processing technology. In 2005, the appellate court affirmed the infringement findings against Nellcor, and instructed the District Court to enter a permanent injunction against Nellcor’s pulse oximeters (e.g., N-395, N-595) that were found to infringe. In January 2006, Masimo and Nellcor entered into a settlement agreement, where Nellcor, among other things, agreed to discontinue shipment of the pulse oximeters that were found to infringe Masimo’s patents.
Published papers have compared signal extraction technology to other pulse oximetry technologies and have demonstrated consistent favorable results for signal extraction technology. Signal extraction technology pulse oximetry performance has also been shown to translate into helping clinicians improve patient outcomes. In one study, retinopathy of prematurity (eye damage) was reduced by 58% in very low birth weight neonates at a center using signal extraction technology, while there was no decrease in retinopathy of prematurity at another center with the same clinicians using the same protocol but with non-signal extraction technology. Other studies have shown that signal extraction technology pulse oximetry results in fewer arterial blood gas measurements, faster oxygen weaning time, lower sensor utilization, and lower length of stay. The measure-through motion and low perfusion capabilities it has also allow it to be used in previously unmonitored areas such as the general floor, where false alarms have plagued conventional pulse oximetry. As evidence of this, a landmark study was published in 2010 showing clinicians using signal extraction technology pulse oximetry on the general floor were able to decrease rapid response team activations, ICU transfers, and ICU days.
In 2011, an expert workgroup recommended newborn screening with pulse oximetry to increase the detection of critical congenital heart disease (CCHD). The CCHD workgroup cited the results of two large, prospective studies of 59,876 subjects that exclusively used signal extraction technology to increase the identification of CCHD with minimal false positives. The CCHD workgroup recommended newborn screening be performed with motion tolerant pulse oximetry that has also been validated in low perfusion conditions. In 2011, the US Secretary of Health and Human Services added pulse oximetry to the recommended uniform screening panel. Before the evidence for screening using signal extraction technology, less than 1% of newborns in the United States were screened. Today, the Newborn Foundation has documented near universal screening in the United States and international screening is rapidly expanding. In 2014, a third large study of 122, 738 newborns that also exclusively used signal extraction technology showed similar, positive results as the first two large studies.
High resolution pulse oximetry (HRPO) has been developed for in-home sleep apnea screening and testing in patients for whom it is impractical to perform polysomnography. It stores and records both pulse rate and SpO2 in 1 second intervals and has been shown in one study to help to detect sleep disordered breathing in surgical patients.
In 1995 Masimo introduced perfusion index, quantifying the amplitude of the peripheral plethysmograph waveform. Perfusion index has been shown to help clinicians predict illness severity and early adverse respiratory outcomes in neonates,   predict low superior vena cava flow in very low birth weight infants, priovide an early indicator of sympathectomy after epidural anesthesia, and improve detection of critical congenital heart disease in newborns.
In 2007, Masimo introduced the first measurement of the pleth variability index (PVI), which multiple clinical studies have shown provides a new method for automatic, noninvasive assessment of a patient's ability to respond to fluid administration. Appropriate fluid levels are vital to reducing postoperative risks and improving patient outcomes: fluid volumes that are too low (under-hydration) or too high (over-hydration) have been shown to decrease wound healing and increase the risk of infection or cardiac complications. Recently, the National Health Service in the United Kingdom and the French Anesthesia and Critical Care Society listed PVI monitoring as part of their suggested strategies for intra-operative fluid management. 
A blood-oxygen monitor displays the percentage of blood that is loaded with oxygen. More specifically, it measures what percentage of hemoglobin, the protein in blood that carries oxygen, is loaded. Acceptable normal ranges for patients without pulmonary pathology are from 95 to 99 percent. For a patient breathing room air at or near sea level, an estimate of arterial pO2 can be made from the blood-oxygen monitor "saturation of peripheral oxygen" (SpO2) reading.
A typical pulse oximeter utilizes an electronic processor and a pair of small light-emitting diodes (LEDs) facing a photodiode through a translucent part of the patient's body, usually a fingertip or an earlobe. One LED is red, with wavelength of 660 nm, and the other is infrared with a wavelength of 940 nm. Absorption of light at these wavelengths differs significantly between blood loaded with oxygen and blood lacking oxygen. Oxygenated hemoglobin absorbs more infrared light and allows more red light to pass through. Deoxygenated hemoglobin allows more infrared light to pass through and absorbs more red light. The LEDs flash about thirty times per second which allows the photodiode to respond to the red and infrared light separately. The amount of light that is transmitted (in other words, that is not absorbed) is measured, and separate normalized signals are produced for each wavelength. These signals fluctuate in time because the amount of arterial blood that is present increases (literally pulses) with each heartbeat. By subtracting the minimum transmitted light from the peak transmitted light in each wavelength, the effects of other tissues is corrected for. The ratio of the red light measurement to the infrared light measurement is then calculated by the processor (which represents the ratio of oxygenated hemoglobin to deoxygenated hemoglobin), and this ratio is then converted to SpO2 by the processor via a lookup table.
A pulse oximeter is a medical device that indirectly monitors the oxygen saturation of a patient's blood (as opposed to measuring oxygen saturation directly through a blood sample) and changes in blood volume in the skin, producing a photoplethysmogram. The pulse oximeter may be incorporated into a multiparameter patient monitor. Most monitors also display the pulse rate. Portable, battery-operated pulse oximeters are also available for transport or home blood-oxygen monitoring.
Pulse oximetry is particularly convenient for noninvasive continuous measurement of blood oxygen saturation. In contrast, blood gas levels must otherwise be determined in a laboratory on a drawn blood sample. Pulse oximetry is useful in any setting where a patient's oxygenation is unstable, including intensive care, operating, recovery, emergency and hospital ward settings, pilots in unpressurized aircraft, for assessment of any patient's oxygenation, and determining the effectiveness of or need for supplemental oxygen. Although a pulse oximeter is used to monitor oxygenation, it cannot determine the metabolism of oxygen, or the amount of oxygen being used by a patient. For this purpose, it is necessary to also measure carbon dioxide (CO2) levels. It is possible that it can also be used to detect abnormalities in ventilation. However, the use of a pulse oximeter to detect hypoventilation is impaired with the use of supplemental oxygen, as it is only when patients breathe room air that abnormalities in respiratory function can be detected reliably with its use. Therefore, the routine administration of supplemental oxygen may be unwarranted if the patient is able to maintain adequate oxygenation in room air, since it can result in hypoventilation going undetected.
Because of their simplicity of use and the ability to provide continuous and immediate oxygen saturation values, pulse oximeters are of critical importance in emergency medicine and are also very useful for patients with respiratory or cardiac problems, especially COPD, or for diagnosis of some sleep disorders such as apnea and hypopnea. Portable battery-operated pulse oximeters are useful for pilots operating in a non-pressurized aircraft above 10,000 feet (12,500 feet in the U.S.) where supplemental oxygen is required. Portable pulse oximeters are also useful for mountain climbers and athletes whose oxygen levels may decrease at high altitudes or with exercise. Some portable pulse oximeters employ software that charts a patient's blood oxygen and pulse, serving as a reminder to check blood oxygen levels.
Pulse oximetry measures solely hemoglobin saturation, not ventilation and is not a complete measure of respiratory sufficiency. It is not a substitute for blood gases checked in a laboratory, because it gives no indication of base deficit, carbon dioxide levels, blood pH, or bicarbonate (HCO3-) concentration. The metabolism of oxygen can be readily measured by monitoring expired CO2, but saturation figures give no information about blood oxygen content. Most of the oxygen in the blood is carried by hemoglobin; in severe anemia, the blood will carry less total oxygen, despite the hemoglobin being 100% saturated.
Erroneously low readings may be caused by hypoperfusion of the extremity being used for monitoring (often due to a limb being cold, or from vasoconstriction secondary to the use of vasopressor agents); incorrect sensor application; highly calloused skin; or movement (such as shivering), especially during hypoperfusion. To ensure accuracy, the sensor should return a steady pulse and/or pulse waveform. Pulse oximetry technologies differ in their abilities to provide accurate data during conditions of motion and low perfusion. 
Pulse oximetry also is not a complete measure of circulatory sufficiency. If there is insufficient bloodflow or insufficient hemoglobin in the blood (anemia), tissues can suffer hypoxia despite high oxygen saturation in the blood that does arrive. In 2008, a pulse oximeter that can also measure hemoglobin levels in addition to oxygen saturation was introduced by Masimo. In addition to the standard two wavelengths of light, the devices use multiple additional wavelengths of light to quantify hemoglobin.
Since pulse oximetry only measures the percentage of bound hemoglobin, a falsely high or falsely low reading will occur when hemoglobin binds to something other than oxygen:
A noninvasive method that allows continuous measurement of the dyshemoglobins is the pulse CO-oximeter, which was invented in 2005 by Masimo. It provides clinicians a way to measure the dyshemoglobins carboxyhemoglobin and methemoglobin along with total hemoglobin.
According to a report by iData Research the U.S. pulse oximetry monitoring market for equipment and sensors was over 700 million USD in 2011.  In 2008, more than half of the major internationally exporting medical equipment manufacturers in China were producers of pulse oximeters.
In June 2009, video game company Nintendo announced an upcoming peripheral for the Wii console, dubbed the "Vitality Sensor", which consists of a pulse oximeter. This marks the onset of the use of this device for non-medical, entertainment purposes.
Pulse oximetry have even been recently been introduced to smartphones, such as the Samsung Galaxy S5.
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