Could someone explain to me why an exhaust leak could affect the reading of a O2 sensor?
I cannot picture how a leak out of a pressurized pipe could make a difference in the AFR reading inside the pipe.
Or am I not understanding something here.

I'm no expert but I expect that the pressurized pipe is really filled with pulses of exhaust gas pressure interspersed with pulses of vacuum. The vacuum (less than ambient pressure) draws in outside air.