The goal of this chapter is to implement a wireless shaft-mounted accelerometer to provide a robust signal processing tool able to detect, localize, and assess mechanical irregularities in rotary machineries. For the purpose of experimental studies, a gear testing apparatus is designed and built to acquire vibration signal via both a traditional bearing-mounted accelerometer and the shaft-mounted accelerometer. First, a comparative analysis is outlined to compare the capability of the shaft-mounted and bearing-mounted accelerometers to the feature extraction of the damage. Then the quality of the vibration signal measured by the shaft-mounted accelerometer in different location and directions of the shaft is studied. Afterward, the sensitivity of the shaft-mounted accelerometer to the severity and location of the damage is evaluated by considering different size of one broken tooth and choosing different locations for the fault with respect to the transducer. Finally, the shaft-mounted accelerometer is used to obtain the same experimental results, while the speed is changing, which suggests the proposed approach is also effective towards condition monitoring of the gears under fluctuating load-speed condition.