Rotary encoders are used similarly to potentiometers. They're different from potentiometers in that an encoder has full rotation without limits. They output gray code so that you can tell how much and in which direction the encoder has been turned.

This encoder has a red/green LED built in, as well as a push-button. This version has an updated material that is heat resistant and slightly changed dimensions, but should still work well with our rotary encoder breakout board and the clear knob.