A quadrature encoder outputs two square waves 90 degrees apart (See Image below). Using a quadrature encoder in robotics one can determine the speed and direction of a motor and using those measures the robots relative movement and position.
Acquiring the encoded signals can be a challenge. Each encoder requires two free IO lines and since the signals can trigger relatively quickly it is preferred that at least one of the inputs is an interrupt.
The TinyQED is an ATTiny45 based widget that counts the signals from the encoders and makes them available via I2C. The counts can easily be read from an Arduino using the Wiring library.
Recommended Extras :
Buy pre-made cables from SeeedStudio http://www.seeedstudio.com/depot/grove-universal-4-pin-buckled-50cm-cable-5-pcs-pack-p-928.html