In the image you can see the ATiny2313 in a SMD package, which I've soldered on a PCB with headers, but the microcontroller is available in easier to use DIP packages, too.
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Signing UpStep 1Hardware
* ATiny 2313
* 18.432 MHz oscillator (this frequency is required for a perfect 115,200 baud signal for the OLED display, but the display has auto baud detection, so you can use other oscillators as well, or just the internal oscillator)
* 7805 voltage regulator
* 10 µF electrolytic capacitor
* 1 µF ceramic capacitor
* 2 x 100 nF ceramic capacitor
* 3 x 10 k resistors
* µOLED-128-G1 (from http://www.4dsystems.com.au , but you can use a LCD display, too, or something different, e.g. use the encoder for controlling the pitch of some sound output)
* quadrature rotary encoder (I've used Alps, type EC12E2420404, but you can use other encoders)
* ATiny programmer (I've used the AVR Dragon: http://www.atmel.com/dyn/products/tools_card.asp?tool_id=3891 )
* a breadboard like you can see in the video, or veroboard and some wires, if you want to solder it
* some tools, like solder iron, if you use a veroboard, side cutter etc.
* power supply (anything from 7 V to 12 V works, even a 9 V battery)
* a PC with Windows for WinAVR and AVR Studio
The schematic is very easy to build this on a breadboard:
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