Here is the video:
Each encoder has a push button which is operated when you push in the encoder. I set these up to reset the servo position to 90 degrees.
Each encoder has three output pins, the middle pin is connected to ground. The other two pins are connected to input pins on the Arduino with the internal pull ups enabled so that the pins are normally high. When you rotate the encoder one of the encoder outputs will go low before the second pin. By monitoring which pin goes low first you know which direction the encoder has been turned in.
Here is the code I used for my servo tester, if you have any questions about it just head over to the forum discussion here.