For some reason I got it into my brain that interfacing the rotary control with a PIC chip would be a good idea. I can only think of a couple of vague uses for it at the moment and none are particularly useful, but I hope to do something cool with this in the future.
Step 1: Go get stuff.
1 - Rotary phone
3 - 220 ohm resistors
2 - 0.1uF capacitors
2 - 20K resistor (can substitute anything between 10K and 47K)
2 - LEDs
1 - PIC development board (I used the Basic Micro development environment)
1 - 20 MHZ resonator or crystal
1 - Breadboard
1 - 5V power source
1 - A foot or so of hookup wire
1 - Screwdriver
1 - Wire stripper