When I said, "A servo is a closed loop system, meaning that it utilizes a feedback device to related back velocity and position information," I mean that today's servos do not need both Tachs & Encoders like older systems where the tach gave velocity info and the encoder gave position. The encoder gives back pulses to the controller. To the controller, each pulse indicating a position, and the number of pulses per time unit equal velocity. I apologize for not being more clear or some of you reading into it too much.
The typical step motor is your 1.8 degree or 200 step per rev motor. The construction of the rotor & stator are very precise and you can expect +/- 2% of the 1.8 degrees. Also just because the motor is 200 step/rev, it does not mean that it can only do that resolution. The motion of the stepper is created by the drive it is connected to. Rotation of the motor is causes by stator electromagnets pulling rotor permanent magnets. You have your 2 phases and 100 alternating N-S magnets on a stack (50N, 50S). By switching the phases on and off, you can pull the rotor to the next position. Now if you want to achieve greater resolutions, all you have to do is manipulate the current going into the phases. Instead of turning Phase A off and Phase B on, we leave A on at 100% current and turn Phase B to 10% current. This will cause the rotor to turn slightly because of the stator/rotor magnetic attraction.
This winding manipulation is known as microstepping. There are resolutions out there to 50,000 steps per rev, but I was told that anything over 36,000 steps/rev does not make any difference. Microstepping was created to get better positioning resolutions along with smoother velocities. The problem was that when microstepping you were loosing useable torque due to resonance. Today, this is not the case with the newer stepper drives that incorporate Anti-Resonance. I believe that IDC Motion and Oriental have the best performing stepper drives our of all I used. But this gets me into another discussion. Why? Why do all this design into stepper motor technology when the applications we are applying steppers into don't need it? Can anyone answerer that? Maybe the reason is because they can, and to show the servos that they still have their place and can do things they can't. Maybe the engineer doesn't understand servo, so he keeps designing steppers. Until a servo can maintain 100% holding torque at zero speed with no dither or come down to the cost of a stepper system, they will never be going away.
Now on to the next topic, Steppers using Encoders. After the past 4 1/2 years of applying servo's and steppers into almost every application imaginable, I learned that people who want an encoder on the stepper should just go servo. Yes we can put encoders on steppers, and in many applications I did so. An encoder can be utilized in many ways by steppers. Sometimes is was still cheaper to put the encoder on there for that insurance policy to make sure it got there. On the other hand, maybe the controls guy was insecure.

heheheh.
1. It can increase the system resolution and accuracy.
2. Be used for stall detection
3. Be used for Position Verification
4. What I call Pseudo Servo.
What is Psuedo Servo in steppers? I have seen stepper systems actually close the loop around the encoder. Servoing the stepper.

The only place I found this useful was in applications where they wanted the stepper to move back to position if the system was over-torqued or when they enable the system and move the shaft and re-enable and have it move back into position.
Do you have a specific application your working on that you could share with us? I'm sure all of us posting would be happy to help make a recommendation.
Cameron Anderson
Sales & Applications Engineer
"Dedicated to the Science of Motion"