Yes, a wideband O2 sensor is used to determine the air fuel ratio during tuning. There are typically two ways this is done. One (and the best method, imo) is to use a wideband O2 sensor that plugs into a bung hole that has been put in the headers before the CAT's. That is between the engine and the CAT. This requires a bung to be welded in your headers and plugged when not in use.
The other method is to use a tail pipe sniffer. No bung is required. However, these are arguably not as accurate.
A third method, and more involved, is to obtain a portable wideband O2 meter and install a bung in your header. Then you can carrry it around with you as you drive. Onboard AFR meters are pretty cool.
The reason for this is the stock O2 sensors are not really accurate at anything other than 14.7:1 AFR, or very close to it.
As to cost a typical LS1 Edit tuning using a dyno is typically as much $500. It all depends on who does the tuning. Some of them offer free re-tunes should they be needed. (say you added more mods)
You can also buy LS1 Edit yourself ($550) and do most of the tuning on the street before going to a dyno to tune for WOT. However, this requires logging software such as AutoTap, EFI Live or EASE, and a laptop computer. And most importantly the knowledge of how to use these tools correctly.
