Apple Watch
Digital Crown
The crown on the side of Apple Watch is not connected to anything you can see. Turning it moves a striped shaft past a light and a sensor, and the watch counts the stripes.
Counting light
The crown sits on a short shaft. A pattern of light and dark stripes runs around that shaft, and a small light shines on it. A sensor beside the light sees the reflection change each time a stripe edge passes.
Each change is one count. In optical encoders like this one, two readings taken slightly out of step tell which way the shaft is turning, so the same stripes can scroll a list up or down.
Why it feels like clicks
Since Apple Watch Series 4, the crown has haptic feedback: the Taptic Engine taps as you scroll, so a smooth wheel feels like it has detents.