This Leviton spec grade occupancy switch uses a relay. (ODS10) The listing warning specifically state that it is not to be used with a receptacle ie. plug-and-cord devices.
Technically speaking, what is the potential hazard here. I have an educated guess, but would like to really understand this.

Haligan: I have no doubt that there are any number of folks on this post who could help you with this, but why not go directly to Leviton Customer Service at 1.800.824.3005? They made it, and provided the warning; they should be able to explain it.

The electronics in the switch are powered by a small (milliamps) current passing through the load, even when "off". Proper operation depends on the load having continuity at all times, which would not be the case with a receptacle with nothing plugged into it.

The particular unit you have is rated 800 Watts @ 120 Volts incandescent.

This, and other control products with similar ratings would lose their smoke in short order if someone was to plug in ie: an 1800W blow dryer to a receptacle it controls.

That's why

I believe the electronics are operated between the hot and the equipment ground, rather than through the load. Here's a pic of one without an equipment grounding connection. (277V system)

Interesting, and kind of disturbing.

Does the unit operate properly without the equipment ground connection? Such a reading COULD be explained by RF bypass capacitors from line to ground, rather than using the ground as the return conductor for the electronics.

Would UL allow a manufacturer to use the ground as a neutral return, even at such presumably low current levels?

The directions with them state that they will not work properly without the equipment grd connection. (and they won't).
They're UL listed and CSA certified

There were some (Wattstopper, I think) wall occ sensors made with a neutral pigtail, but I'm not sure if they're still producing them.

They still are.

Scott now i can see why many peoples been yelping at my ear with the motion dectors and after i did see what you show us on the photo and i did rember very clear with the instructions it stated make sure you turn off the power if you will remove the devices but instering twist that one question i did not get chance to do this is how much current leaking going thru the device like this ??

the reason why i want to prepared in case if i ran into the AFCI crap you know what i mean

thanks.

Merci , Marc