This is a very common problem for Gen 1/1.5 Solara's, it just happened to me actually. Unfortunately, there is no cheap solution and you do need to replace the sensor. A dealer will charge you $200 for the sensor and probably another $300 for the installation. The intake manifold needs to come off, it is somewhat of a time consuming process.
A knock sensor is basically a microphone that listens to your cylinders for the sound of detonation when there shouldn't be. Usually, when your piston is at the top of its' path, the spark plug will ignite the compressed mix of fuel and air. When you're knocking, it means the air/fuel mix is combusting from the heat generated by the compression.
You can run your car after the sensor is blown, but you'll feel a major difference in power and gas mileage and it may worsen. You should run higher octane gas if you're not already, and if you're interested at all in modification, you should email
Jim@foreignaffairs.com. Foreign Affairs has developed a fuel system upgrade that more evenly distributes fuel to V6 solaras. The current system is a line that goes from the filter into bank 1, then back to bank 2, leaving bank 2 a little lean. Jim's system has a T fitting that sends a more even flow of fuel to both banks of the engine. I've been using Jim's system and have been very happy.
It worked fine until I fixed it! 
Linear Mode
