We are working on interfacing the LEGO sensors and motors to a compact lightweight computer for more sophisticated control. Aret Carlsen brings us a video demonstrating how one can hack into the NXT Standard Motor:
See also quadrature encoder or rotary encoder at wikipedia and the LEGO NXT Hardware Developers Kit (LEGO NXT data sheets). Philo also has the pinout diagram on his page on deriving power from the Motor A port.
Additional details can be found in the excellent book Extreme NXT: Extending the LEGO MINDSTORMS NXT to the Next Level (Technology in Action) by Michael Gasperi, Philippe E. Hurbain, and Isabelle L. Hurbain.