const byte aPin = 2, bPin = 3;
const int8_t transitions[16] = {0, -1, 1, 0, 1, 0, 0, -1, -1, 0, 0, 1, 0, 1, -1, 0};
byte previous = 0;
int quarterSteps = 0;
long count = 0;
long reportedCount = 0;
unsigned long reportedAt = 0;

byte readState() {
  return (digitalRead(aPin) << 1) | digitalRead(bPin);
}

void setup() {
  pinMode(aPin, INPUT_PULLUP); pinMode(bPin, INPUT_PULLUP);
  previous = readState();
  Serial.begin(9600);
  Serial.println("Turn slowly; count is full quadrature cycles, not necessarily detents");
}

void loop() {
  const byte current = readState();
  if (current != previous) {
    if ((current ^ previous) == 3) quarterSteps = 0; // Invalid two-bit jump.
    else quarterSteps += transitions[(previous << 2) | current];
    previous = current;
    if (quarterSteps >= 4) { ++count; quarterSteps -= 4; }
    if (quarterSteps <= -4) { --count; quarterSteps += 4; }
  }
  const unsigned long now = millis();
  if (now - reportedAt >= 100 && count != reportedCount) {
    reportedAt = now; reportedCount = count;
    Serial.println(count);
  }
}