I use incremental rotary encoder to measure angle with Beaglebone. But I dont have any experience on decoding encoder.
http://www.farnell.com/datasheets/1599245.pdf

Can you share any rotary encoder library for Beaglebone? I need a starting point.

 

These are simple incremental quadrature encoders, two square wave pulses separated by 90°.
They show either open collector or line driver.
Often a system will use either the two rising edges or all four edges to increase the resolution by x2 or x4.
The technology used for anything over ~50pulses/rev is done using the Moiré technique.
Max.