HEIDENHAIN rotary encoders operate on the principle of photoelectrically scanning very fine gratings.
The measuring standard for incremental rotary encoders is a graduated glass disk with a radial grating of lines and gaps forming an incremental track. A second track carries a reference mark.
At a small distance from the rotating graduation is a scanning reticle with a grating in each of four fields, and a fifth field for the reference mark. The four fields on the scanning reticle are phase-shifted to each other by one quarter of the grating period (= 360°/line count).
All these fields are penetrated by a beam of collimated light produced by a light unit consisting of an LED and condenser lens. When the graduated disk rotates, it modulates the beam of light, whose intensity is sensed by silicon photovoltaic cells.
 
Signal generation
The photovoltaic cells for the incremental track produce four sinusoidal current signals, phase-shifted from each other by 90° (elec.): l_0°, l_90°, l_180° and l_270°. The photovoltaic cell for the reference mark outputs a signal peak. The four sinusoidal signals do not lie symmetrically to the zero line. For this reason the photovoltaic cells are connected in a push-pull circuit, producing two 90° phase- shifted output signals l₁ and l₂ in symmetry to the zero line.

The measuring standard for singleturn encoders is a graduated glass disk with several coded tracks. At a short distance from the rotating disk surface are one or more scanning reticles with transparent fields for each of the disk’s coded tracks.
Each scanning reticle masks a beam of collimated light produced by a light unit consisting of an LED and condenser lens. When the graduated disk rotates, it modulates the beam of light, whose intensity is sensed by silicon photovoltaic cells.
Absolute rotary encoders that also output incremental signals have four scanning fields above the finest track. The four fields on the scanning reticle are phase-shifted relative to each other by one quarter of the grating period (grating period = 360° divided by the line count).
 
For determining a position within one revolution, multiturn absolute encoders function on the same principle as singleturn encoders.The measuring standard for distinguishing separate revolutions is a series of permanent- magnet circular graduations connected by gears. The transmission is designed for scanning speeds up to 12000 rpm and temperatures of –40 °C to 120 °C. The graduations are scanned by Hall sensors.
 
LSB – "Least Significant Bit":
In a group of bits representing a number, the bit with the smallest weight by virtue of its position.
MSB – "Most Significant Bit":
In a group of bits representing a number, the bit with the greatest weight by virtue of its position.
MSB – "Most Significant Bit" inverts:
The inverted signal MSB can be used to reverse the counting direction.