Gday Neil
The encoders on an LX90 are mounted on the motor and are used to guesstimate where the scope is pointing, and control the motor speed feedback loops for tracking etc.
As such, many things affect the final pointing accuracy like periodic and non periodic gear errors, flexure, clutch slip etc etc etc.
ref
http://jan.eaglecreekobservatory.org/dec.html for pictures of the DEC assy and its motor / encoder setup
Andrew