I came across this phrase in a sentence : XXX is a tool that provides YYY by instrumenting the engine. What exactly does instrumenting something means?
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"instrumenting" is not an accepted word. It is jargon used in the engineering field. What is meant is that instruments are "installed" on the engine (this could mean physically or perhaps electronically). Instruments in this case means devices that allow you to determine various conditions necessary for control of the engine. This may include a tachometer, engine temperature gauge, water level, etc.
It seems to me the phrase you posted is not the best way make the concept clear. I would not expect the term "instrumenting" to be used often.