Recent interest in distributed fiber optic sensing systems utilizing optical reflectometry has generated a need for simulation tools to study the effects of the many system variables on performance, as well as assess the performance claims of various Optical Time Domain Reflectometry (OTDR) instruments and the suitability for their use in a particular sensing application. Computer simulation tools have been developed to enable the optoelectronics system designer to study the fundamental limitations of instrument and sensing system performance based on Rayleigh backscattering. A standalone program utilizing a three segment optical fiber model has been developed that allows calculation of the absolute backscattered power as a function of time, both the total power and the time dependent power from a particular fiber segment. In addition, comprehensive PC based spreadsheet tools have been developed to allow for modeling of signal to noise ratios,including receiver design, in all types of coherent and incoherent optical time domain reflectometry systems, for both single mode and multimode systems. Several examples of the applications of these programs are presented and discussed, with application to the design and development of a high spatial resolution measurement terminal for monitoring short structures. Finally, we present experimental data on a two sensor system based on periodic microbending that shows effects of sensor interaction, and demonstrates the need for careful interpretation of OTDR results as well as further experimental and theoretical work on the effects of microbending induced leaky mode coupling and backscattering in the presence of such modes.