Here's the simple version:
The VSS (on '90-'97 cars) is just a switch. When it's closed, it conducts to ground. When it's open, it does not. It opens and closes many times per second as the speedometer cable rotates.
Here are the two states of the VSS, which I have symbolized by drawing a SPST switch at the left side. In both of these drawings, I have added a pullup resistor at the top. At the right is the pin which feeds into the ECU (or the cruise control, or the A/T controller)
First, here is what it looks like when the VSS is open:
Voltage is coming in through the resistor, but it has nowhere to go, so the ECU sees +5v at its input.
Now, here is the VSS closed:
Voltage flows through the resistor, but it has a path to ground through the switch contacts. Thus, the voltage all drains out to ground, and the ECU sees 0v at its input.
If you imagine this system cycling back and forth between the two states at a high speed, the result (as seen by the ECU) will be a squarewave signal alternating between 0 and 5 volts.
The exact value of the resistor is not critical. You could use 1k, 2.2k, whatever you have lying around. 1k would be brown-black-red-(gold/silver), and 2.2k would be red-red-red-(gold/silver).
The key point is that without the resistor providing a pullup, the ECU will see 0v all the time, regardless of whether the VSS is open or closed. In the original design, the pullup resistor was inside the ECU (or the cruise control box or the A/T controller), however since you have none of those things, you need to supply the pullup yourself.
Originally Posted by Preluding
Why do I need my TPS signal at all?
I took that image from the MegaSquirt documentation. On that ECU, there is a pin labeled "TPS Vref" which is not specifically related to TPS, it's just a convenient source of +5v that it commonly used to provide a pullup for the TPS, as well as for whatever other external sensors need a +5 pullup. Your AEM probably provides a similar supply of external +5v. I don't know what pin on the AEM it is, but it should be going to pin 3I of the ECU harness (a light green / white wire) as this is how +5 is supplied to the TPS (as well as the EGR sensors and the TCM) in the factory harness.