Earlier quoted context omitted.
Modern engines (as in, post 1989) will sense an engine knock (or a misfire) and go into open cycle ECU mode, ignoring the lambda sensor inputs. It'll run really rough and rich in order to avoid any more knocking, which could seriously damage the engine.
And to those curious on how it senses it, they literally stick a microphone in the engine calibrated for the ping (knock) frequency.
Thanks for sharing, that's actually really fascinating.
the patent for anyone interested: https://www.google.com/patents/US4040294