You need to connect the wires from the mpg encoder A+ A- B+ and B- to input pins on the port(s) and then fill in the table with which pin each cable is connected to. There are not usually many input pins available on port 1 so frequently port 2 would be used. This is where trying to use a computer with only one parallel port starts to cause issues. You can often fit a second port on desktop computers but then getting suitable drivers can be a problem. Adding one to a laptop is probably impossible. Motion controllers such as a smooth stepper running off a network connection or a USB connection get around this problem as they have 2 parallel ports and often a separate mpg connector.
Martin