Eliot writes about "historical sense" in "Tradition and the Individual Talent." He writes that the historical sense "involves a perception, not only of the pastness of the past, but of its presence" and it is "a sense of the timeless as well as of the temporal and of the timeless and the temporal together, is what makes a writer traditional."
In this essay, Eliot does not describe "traditional" as old-fashioned. Rather, for him, traditional means that a poem is a particular part of the general whole of all poetry in history. The individual talent emerges from an awareness of his/her present poetic contribution and epoch as a continuation of that history of poetry. The present poet who is aware of his/her place AND the whole of this history is more able to be individual.
In this essay, Eliot also describes the good poet as one who does not dwell on emotion or his/her own personality. For Eliot, "emotion reflected in tranquility," the Romantic ethos for good poetry, is an inadequate formula for poetry. For Eliot, the poet must depersonalize himself and treat his mind more like a medium for a chemical reaction. Therefore, the poet's mind, in order to create new poetry in a traditional continuum, must act as a catalyst, applying pressure and new combinations of the already established, traditional elements in the reaction.
This analogy of the chemical reaction and combining things in new combinations is similar to Eliot's ideas about the individuality of a poet within a continuing poetic tradition. To know the past traditions (to become historically aware = historical sense), the poet must labor as a chemist learns about former experiments, elements, reactions, combinations, etc. Only then, by divorcing his personality from his poetic creation, can the poet immerse his work within the historical medium of all poetry throughout history. Another way to think of this is that the entire history of poetry is one giant chemical reaction. A new poem which has individuality and historical sense will not only be informed by the past, but since it is part of the entire history of poetry, it will affect interpretations of the poems of the past as well. In this sense, historical sense is indispensable for the mature poet and every poem with historical sense affects every other poem in history.
Like the chemical reaction that Eliot uses as an analogy of the poet's depersonalized mind, each element (poem) in this historical tradition of poetry affects every other element (poem). The past informs the present poetry. And if the present poetry was created with this historical sense, then the present poetry will also inform the past.