//By default or at starting ab is 0
//means your shaft did not move or still
ab = ab << 2;
// Now you shifted the already read value of ab by 2 bits
// so that you can accommodate new two bits from encoder
// there new two bits give the current movement of shaft
ab |= (port & 0x3);
// now you read the two bits from port and appended it with old bits
// and you have a 4bit number now
// see table on page 2 of datasheet, every number tells you whether your shaft moved clockwise or anti-clockwise.
// these values are stored in array and read with current value of ab