A piezo disc works when an electric current is passed over the ceramic material in the disc, causing it to change shape and hence make a sound (a click). The disc also works in reverse: when the disc is knocked or squeezed, the force on the material causes the generation of an electric current. You can read that current using the Arduino and you are going to do that now by making a Knock Sensor.
|Piezo Sounder (or piezo disc)|
|2-Way Screw Terminal|
|5mm LED (any color)|