Normally potentiometer is a passive electronics part which changes resistance when knob is turned. Kuala decided to make his own by using microcontroller and rotary encoder. Since it is digitally controller, he also attached three 7 segment LED indicators to display its current value.
Operation is simple – microcontroller reads rotary encoder steps and increases/decreases value which then can be sent to another host device through I/O interface. If you need real resistance value, it can bu used along with digitally controlled potentiometer (like MCP4551). With rotary encoder select there may be several devices chained.