The invention discloses a composite optical fiber sensing system and a sensing method. By adopting the system and the method, the same positioning precision as phase-sensitive OTDR can be achieved. Moreover, high-frequency details of vibration can be obtained, the type of vibration can be identified accurately, and the false alarm rate of the system is effectively reduced. The phase-sensitive OTDR carried out detection by using reverse Rayleigh scattered light, the intensity of reflected light is extremely low, and the light intensity power of an interferometer is high. Therefore, light signals of the phase-sensitive OTDR can be easily submerged in signals of the interferometer. By introducing a FBG, the system successfully combines light paths and separates light signals of the interferometer and a scatterometer, and the system is relatively simple in structure and low in cost. By performing an improved moving average algorithm and a wavelet information entropy algorithm on Rayleigh scattered signals of a laser light source with ultra narrow line width, the accurate position of vibration can be worked out. Interference signals of the laser light source with ultra narrow line width contain rich frequency information, and through wavelet packet decomposition on the interference signals, the type of vibration can be identified via a neural network. The rate of false alarm is reduced.