Encoder circuit basically converts the applied information signal into a coded digital bit stream. Decoder performs reverse operation and recovers the original information signal from the coded bits. 2. In case of encoder, the applied signal is the active signal input. Decoder accepts coded binary data as its input.Binary code of N digits can be used to store 2N distinct elements of coded information. This is what encoders and decoders are used for. Encoders convert 2N lines of input into a code of N bits and Decoders decode the N bits into 2N lines