Rotary encoders have many uses in positioning applications. For example, a rotary encoder attached to a DC motor can be used to keep track of the number of revolutions the motor has rotated from its initial position.

One of the simplest applications of rotary encoders is the mechanical computer mouse. A mechanical mouse has 2 rotary encoders: One for X position and one for Y position. As the mouse moves, each Incremental encoder outputs square wave pulses. The number of pulses indicate how far the mouse has moved in X or Y direction.