Photoelectric shaft encoder is an advanced digital angle transducer. Velocity measurement can meet the demands of modern precision servo control system using photoelectric encoder with the advantages of high precision, high resolution and high reliability, therefore, the research has been a popular topic. we introduce the principle and application of photoelectric shaft encoder. Then the applicability, advantages and drawbacks are presented by introducing and comparing various velocity measurement methods. At last, the development trend of velocity measurement methods with photoelectric shaft encoder is prospected.