Encoders or also rotary encoders are based on the same principle as potentiometers. With a rotate motion they measure angles, positions and paths. In contrast to potentiometers, the encoders deliver digital output signals that are converted into electrical signals. There are incremental and absolute encoders to record changes to angles and determine positions. Incremental (rotary) encoders measure angular values using periodic patterns. They are available in two versions; with a magnetic or with an optical scanner. Encoders with optical scanners have a rotatable code disc with line-shaped holes. These are illuminated by an LED. A so-called optoelectronic element converts the light into an electrical signal.

A light-dark signal is created due to the holes. The pattern that this creates looks like a sinus curve due to the rotation of the code disc. Each angle of an object is determined by a field factor using encoders with magnetic scanners. The factors are converted into incremental signals by the sensor.

Absolute rotary encoders report the precise position compared to the incremental encoders. They deliver these immediately after switching the machine and also after a power failure. Here the scanning is also performed magnetically or optically. Absolute rotary encoders provide a decisive advantage compared to incremental encoders when used in machine tools, such as CNC milling machines.