Detecting UFOs is dependent on your radar(s) in your base. Your first radar array will make a 800km radius circle around your base to detect nearby alien craft. Up to two additional radar arrays may be built, each increasing the base's sensor range by 200 km, to a total maximum of 1200km.
UFOs once sighted by your radar come up as a red triangle alien icon and a pop-up box appears with the options to slow down to 5 sec, intercept, and cancel. Slowing down to 5 secs will give you time to plan and react to numerous UFO sighting around your base.
Check out for more information on what information a upgrade radar provides.