This invention provides an integrated time-of-flight sensor that delivers distance information to a processor associated with the camera assembly and vision system. The distance is processed with the above-described feedback control, to auto-focus the camera assembly's variable lens during runtime operation based on the particular size/shape object(s) within the field of view. The shortest measured distance is used to set the focus distance of the lens. To correct for calibration or drift errors, a further image-based focus optimization can occur around the measured distance and/or based on the measured temperature. The distance information generated by the time-of-flight sensor can be employed to perform other functions. Other functions include self-triggering of image acquisition, object size dimensioning, detection and analysis of object defects and/or gap detection between objects in the field of view and software-controlled range detection to prevent unintentional reading of (e.g.) IDs on objects outside a defined range (presentation mode).