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Signals for these outputs should be specified to include the channel complements and be carried in shielded, twisted pairs - and fed to a high impedance differential-line receiver, or opto-isolator, which offers common mode noise rejection. A good rule of thumb is to use them at a maximum of 50 kHz with a maximum of 50 ft of cable. Note that the pull-up resistors can be user supplied or factory installed within the encoder, or both. The arrangement is often dictated by the controller or the need to operate the encoder at a different voltage than the supply voltage.
As implied earlier, incremental encoders with quadrature phasing not only provide directional information, but can increase resolution up to four times when combined with a compatible receiving device.