It shoots little sensors which will detect any enemies in that area. You can see a blue circle on your radar where the arrow landed and in this area the sensor works.
It is a tracking dart. It emits an area pulse for a short time that will show enemy positions on the mini map. This includes stealthed enemies. It is best used to survey an area as the tracking pulses can go through walls and it has a decent lifespan. It takes practice to get the hang of the thing.
I'm not sure if it only shows moving enemies, or whether those were just times that an enemy was slightly outside its range. I wish it had a much better tooltip/description.
it shows enemies that are moving inside the detection radius, if they stay still it won't show anything.
It's actually a very powerful weapon against MAX's, it can almost one shot them. But you have to get really really close to them. So cloak, run in front of a enemy MAX (knifing distance) and shoot it right in the face. The results will be awesome.