I felt that this encoder concept deserves the separate thread.
http://www.capsense.com/capsense-wp.pdf
The principle is not new - every digital calliper works that way.
The beauty of it is that it can be done with standard PCB layout process - and the achieved accuracy and resolution are impressive.
Also, it seems Mitutoyo sells the strip tape cut to size - when I found the source, I will post it here.
For example, if the encoder strip (standard resolution is 0.005mm) is attached to the rim of the 300mm diameter wheel, the angular resolution of such rotary encoder is 7arcsec!