Dividing head

What does the "optical" designation mean? Does it refer to the internal construction or the usage?
In any case, it looks like a very precise and expensive unit
 
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I'm going to go out on a limb, but I think that rotation is measured using an rotary optical encoder. Think of it as a glass scale DRO, but round, rather than linear.
 
 
3 SEC Arc For PG
 
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