Ki detection is basically, being able to read someones powerlevel, though you cannot tell their exact powerlevel, it gives you a sense of how strong they are and whether they are good or evil.
When Dragonball Z first started, all of Frieza's henchmen, this includes Vegeta, Nappa, Raditz, the Ginyu Force, and Frieza himself, used scouters to tell how strong a fighter was, or the were seeing how strong their Ki was.
Later on when alot of the scouters started being destroyed, (either during battle, or the person who used it getting mad and crushing it) more fighters started learning how to sense Ki instead of needing a machine. We first see this being done once Vegeta leaves his battle on Earth and starts his hunt for the Dragonballs of Namek.
Then once Goku lands on Namek he uses his Ki detecting skills to sense who is where and how strong they are. He does this by floating up and looking around and basically feeling it out.