To understand the importance of absolute encoders it is good to first understand the limitations of incremental encoders. This image shows how an incremental encoder uses quadrature output signals to convey position information. In incremental encoders, there are 4 distinct states, and those 4 states are repeated over the rotation of the encoder for however many increments/counts/pulses the encoder has. Since there are only 4 states, the host cannot determine the encoder’s exact radial position without a reference. Many incremental encoders include an index signal which occurs once per rotation and can be used as a home location to count from. This output is useful for obtaining speed information, direction of travel, and can be used to count up or down from the index position. However, this type of encoder is not useful when the host system must know the current position immediately after power on. An incremental encoder can give precise radial position, but only after physically rotating to the index location.