Hello,
I am new to element14 but have electronic experience for a long time. Since some time I play with arduino and I like it a lot. I began writing a blog about electronics and arduino themes. My latest post is about making a rotary encoder with a photointerrupter. It's not only about the basic hardware but also about how to get a reliable signal. If you are interested look at
http://heliosoph.mit-links.info/make-your-own-rotary-encoder/
In the previous posts you can find information about how to use a photointerrupter.
Hope this helps.
Best regards
heliosoph