In this paper, a new application and capabilities of the sensor of the optical mouse are presented. An inexpensive incremental rotary encoder is built based on a mechanical assembly where the sensor is at a fixed distance from a rotary white surface onto which a reference black line is drawn. The optical mouse sensor measures changes in position by optically acquiring sequential surface images and mathematically determining the direction and magnitude of movement. The optical sensor uses the information of the images acquired and an attached light source in a closed control loop to keep an average illumination level in the images. In this paper, the registers involved in this control loop are used to detect high contrast marks without any dedicated image-processing procedure. The detection of this reference mark in a rotary white surface allows the correction of long term cumulative errors originated in displacement measurements performed by the optical sensor and enables the use of the rotary encoder in precision measurements close to 1900 counts per revolution.