The incremental encoder is to be favored over other position transducers (such as a potentiometer or analog encoder) because it detects and reports changes (i.e., increments) relative to a reference position by means of digital operation, i.e., it communicates the count of electronic pulses received by the sensor.

The digital character of its action minimizes the defects common in analog encoders: deterioration, unexpected electrical signals, temperature effects and accuracy in relation to travel.

A zero signal is also available, which provides an absolute zero position of the encoder shaft.