Examples of types are capacitive, magnetic, rack and pinion with encoder, and optical. The optical are most common. In the optical scales, a long narrow piece of glass has a scale made by coating the glass with a very thin layer of chrome, and photo-etching a series of lines through the chrome. An encoder head, with LED's and photo-transistors, is moved along the scale. Since glass has a low rate of thermal expansion, this method can give very precise operation.
Scales can vary in thickness as well.
Older scales were large and had to be mounted on the front of the table. This could cause problems with the auto-stop feature of the table motor. This allows mounting behind the table and out of the way. All scale technologies are pretty good, be sue to choose your DRO by looking at the whole system, not just the scales. There are three levels of read-out devices available from most DRO manufacturers.