An Open Collector output is an NPN transistor. An NPN transistor allows the sinking of current to common. It can be thought of as a switch that allows the circuit, after the load, to be connected to common. This means that a source is required for the output to work. A supply through a load must be connected to the output,
Learn more about encoder output types and how to select the best one for your application in the ENCODER 101: Selecting the Right Output industry whitepaper.