Just connect this to a PMOD or Wing socket on the StickIt! board and your XuLA or XuLA2 can detect clockwise and counter-clockwise rotation of the control knob. You can also detect when the user presses down on the control knob (like a pushbutton).
As with the StickIt! board, we made the entire StickIt! Rotary Encoder module design open-source. All of it: bitstreams, schematic, PCB layout, documentation — everything!
When you order a StickIt! Rotary Encoder module, all you get is the board. That's it. The StickIt! Rotary Encoder module doesn't need any software itself. And the manual is online. As for the fancy box, well, sorry about that. Think of it as "saving the environment".
The StickIt! Rotary Encoder module manual will tell you how to install your board, and it shows a block diagram architecture and how the FPGA connects to the encoder.
Ah, you mean how do you process the encoder output signals so the FPGA can detect the rotation of the control knob? We've already provided an example design that reads the encoder and outputs the result to an LED display. With that, you should be able to get your own designs up and running in no time.