[tStano]

6. Quadrature encoders(they know if you're going forwards or backwards) have 4 wires. One is power, one is common(black), and 2 are signal. Colors depend on the encoder you use. Power and common get wired into one PWM cable as well as one of the signals. The other signal goes into the white of another PWM cable. Both these cables get plugged into the sidecar in the Digital IO (or next year, the robo-rio digital IO, should be similar, if what bomb-squad showed at midwest is accurate).
If you aren't using quadrature, you won't use an Encoder object but a Counter, and you will only have 3 wires, power, common, and signal.