This encoder is designed to be read by two sensors. The disk pattern is designed to create two square waves that are 90° out of phase. Given the two signals and the two phases there are four signals from this encoder (hence the Quad designation). You can also use a rate encoder as a Quadrature encoder if you put your sensors out of phase by 90°.
The image above is being shrunk by your browser to be 100 pixels across, its native resolution is 600 pixels so if you print it on a 600 DPI laser printer it will be a 1" encoder and at 300 DPI a 2" encoder.
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