I had some trouble figuring this out too. I did some more googling and found this site below via an Arduino forum post: 8 wire connection for quadrature encoder, differential wiring
Here is what they say:
"These terms refer not to the waveforms of signals, but instead to the way the signals are wired.
Single-ended wiring uses one signal wire per channel and all signals are referenced to a common ground.
TTL and Open CollectorOpen Collector are types of single-ended wiring.
Differential wiring uses two wires per channel that are referenced to each other. The signals on these wires are always 180 electrical degrees out of phase, or exact opposites. This wiring is useful for higher noise immunity, at the cost of having more electrical connections. Differential wiring is often employed in longer wire runs as any noise picked up on the wiring is common mode rejected."
So basically we have our Power supply wire and ground, and 2 wires per signal (A+/A-, B+/B-, Z+/Z-).
2 + 6 wires = 8 wires
Now all I have to figure out is how to connect those 6 wires to an Arduino. I get how to connect the A+, B+, Z+ signals on 3 interrupt pins, now I'm just wondering if the other 3 (A-, B-, Z-) should be connected to 3 more interrupt pins.