Linear Encoders are defined as "a sensor, transducer or readhead paired with a scale that encodes position. The sensor reads the scale in order to convert the encoded position into an analog or digital signal, which can then be decoded into position by a digital readout (DRO). Motion can be determined by change in position over time. Linear encoder technologies include capacitive, inductive, eddy current, magnetic, and optical. Optical technologies include shadow, self imaging and interferometric. Linear encoders are used in metrology instruments and high precision machining tools ranging from digital calipers to coordinate measuring machines. " Although this is a solid definition Linear Encoders are also used with CNC's and other computer controlled Devices.
Linear Encoders vs Rotary Encoders:
There is one specific benifit from using Linear Encoders opposed to Rotary Encoders; Direct Position Measurement. With a Rotary Encoder you are relying on Machine Alignment and Geometry paired with a Mathmatical interpretation of rotational movement to determine linear position on an axis. WIth a Linear Encoder you immediately eliminate multiple sources of positioning error that can occur with a Rotary Encoder by physically measuring the linear position of the axis.
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Heidenhain
Optical and Magnectic Linear Position Encoders

Newall
Inductive Linear Position Encoders

RSF
Optical Linear Position Encoders

Numerik Jena
Optical Linear Position Encoders