We are developing a probabilistic technique for performing multiple target detection and localization based on data from a swarm of flying sensors, for example to be mounted on a group of micro-UAVs (unmanned aerial vehicles). Swarms of sensors can facilitate detecting and discriminating low signal-to-clutter targets by allowing correlation between different sensor types and/or different aspect angles. However, for deployment of swarms to be feasible, UAVs must operate more autonomously. The current approach is designed to reduce the load on humans controlling UAVs by providing computerized interpretation of a set of images from multiple sensors. We consider a complex case in which target detection and localization are performed concurrently with sensor fusion, multi-target signature association, and improved UAV navigation. This method yields the bonus feature of estimating precise tracks for UAVs, which may be applicable for automatic collision avoidance. We cast the problem in a probabilistic framework known as modeling field theory (MFT), in which the pdf of the data is composed of a mixture of components, each conditional upon parameters including target positions as well as sensor kinematics. The most likely set of parameters is found by maximizing the log-likelihood function using an iterative approach related to expectation-maximization. In terms of computational complexity, this approach scales linearly with number of targets and sensors, which represents an improvement over most existing methods. Also, since data association is treated probabilistically, this method is not prone to catastrophic failure if data association is incorrect. Results from computer simulations are described which quantitatively show the advantages of increasing the number of sensors in the swarm, both in terms of clutter suppression and more accurate target localization.