This article is from the Ethernet FAQ, by James Messer James@NetworkUptime.com with numerous contributions by others.
The SQE Test is used to test for the collision present circuit
between a transceiver and a network interface card (NIC). After data
is successfully transmitted, the Ethernet transceiver asserts the
SQE signal on the collision presence circuit of the NIC. The NIC
sees this test signal as a verification that the transceiver will
inform the NIC when a collision occurs.
In most modern Ethernet networks, the SQE test is not used or
applicable. Most NICs now have an integrated transceiver and
therefore have a hard-wired AUI, so a test for the collision
presence circuit is unnecessary.