Does AWG size affect signal from sensors?
A signal is just a varying voltage.  A wire is just a (very long) small resistor.  The device reading the signal is just a current sink.

That's three terms there: voltage, resistance, and current. Three terms you should know are related by Ohm's Law.

Also, some simple rules:


The thinner the wire the bigger the resistance
The longer the wire the bigger the resistance
The more load on the wire the greater the current


And of course, that all means:


The greater the resistance or the greater the current, the greater the voltage drop across the wire.


If the voltage drop gets too great then the device receiving the signal won't be able to work out what it is.

But then of course a wire is also an antenna picking up all sorts of noise. The longer the wire the more noise it will pick up. And the thinner the wire the greater the resistance and the greater the resultant voltage drop, meaning the lower the noise margin and immunity.

So no, a thinner wire isn't better than a thicker wire. The exact opposite is true.