There are a number of reasons (some of which may not be true!)
1) The accuracy – linear encoders are generally 5 microns resolution – often a digital type scale is 0.01MM – 1/2 the accuracy (Not always true!)
2) Linear encoders are usually well protected against water/suds/oil, even the slightest bit of damp in the digital scale stops it working – and this could be 1/2 way through a cut
3) The DRO itself generally has many features beyond simple x,y,z readout.
For example:
The ability to set a number of zero (datum) points – allows you to work from one datum for say the centre of a set of holes e.g. 6 holes on a 1″ PCD , followed by another set 3″ to the right, and yet still maintain the true datum of the workpiece.
Automatically allow for tool size – instead of calculating the cut you need to do, set the cut you want, include the tool size, then when cutting; work towards a zero target rather than 3 5/32″ x 7 35/64″ – plus your tool size of 12MM.
Allows use of metric tools with imperial dims (or visa versa)
Calculates for holes on a PCD, angular sets of holes, pocket milling, milling radii etc. etc.
The scope really depends on the DRO you get – but it is a lot more than just showing x,y,z.
Julie