Atomically thin transition metal dichalcogenides (TMDCs) like MX ₂(M = W or Mo, X = S or Se) are well-known examples of two-dimensional (2D) semiconductors. They have attracted wide and long-lasting attention due to the strong light-matter interaction and unique spin-valley locking characteristics. In the 2D limit, the reduced dielectric screening significantly enhances the Coulomb interaction. The optical properties of monolayer TMDCs are thus dominated by excitons, the tightly bound electron-hole pairs. In this work, we briefly overview the history and recent research progress of optical spectroscopy studies on TMDCs. We first introduce the layer-dependent band structure and the corresponding modifications on optical transitions, and briefly mention the effects of external magnetic fields and the charge doping on excitons. We then introduce a novel sensing technique enabled by the sensitivity of excitons to the dielectric environment. The exciton excited states (Rydberg states) observed in monolayer TMDCs have large Bohr radii (> few nm), where the electric field lines between electron-hole pairs well extends out of the material. Hence the Coulomb interaction (which affects the quasiparticle band gap and exciton binding energies) in the monolayer TMDC is sensitive to the dielectric environment, making the excitons in 2D semiconductor an efficient quantum sensor in probing dielectric properties of the surroundings. The method is of high spatial resolution and only diffraction limited. We enumerate the applications of monolayer WSe ₂dielectric sensor in detecting the secondary Dirac point of graphene induced by the graphene-hBN superlattice potential, as well as the fractional correlated insulating states emerging in WS ₂/WSe ₂moiré superlattices. Meanwhile, a unified framework for describing the many-body interactions and dynamical screenings in the system is still lacking. Future theoretical and experimental efforts are needed for a complete understanding. Finally, we further discuss the perspectives and potential applications of this non-destructive and efficient dielectric sensing method.