Based on the sensors I've used, that really is how they work. They might use pwm internally, but the output is indeed a current signal.
If you only need to read the sensor, it can be done easily using a resistor like this:
You can adjust the resistor value to adjust the peak voltage. 250R will give you 5v at 20ma.
If you're trying to create a 4-20ma signal, your circuit is going to look something like this:
As you can see it's not just pwm into a filter or something like that, which I get the impression is what you were thinking.
Upon re-reading your question it seems like maybe you're wondering what types of signals are most common? In my experience PWM is basically non-existent. 0-10v and 4-20ma are the most common signals. With flow meters you will sometimes also see high speed pulse signals, where 1 pulse corresponds to a fixed qty of flow.