The simplest method doesn't require an encoder. You can wire a prox switch to an input and have the prox count gear teeth mounted on the conveyor's drive shaft. Instead of gear teeth, you can also use a homemade marker. The limiting factor is the speed of the conveyor and the size of the marker. The prox signal must be on (and off) for a period of time greater than one PLC scan in order for it to be reliably detected. If you can meet those limitations, you can use a standard counter function in ladder logic to keep track of position. Don't overlook the fact that if you design your marker properly, you can count both the off-to-on and the on-to-off transitions of the prox switch.
In addition, you need some method of 'homing' the conveyor. Homing is nothing more than moving the conveyor to a known postion and setting the counter's accumulated value to that value (usually zero).
If the simple method can't keep track of position to the level of accuracy you need, then the next step is to use a high speed counter module in your PLC. The capabilities vary among PLC brands. In general, these are 'smart' modules, meaning that they have their own microprocessor on board that runs independently of the PLC. This allows the HSC to keep track of counts at higher frequencies. The accumulated count, count rate, direction, and other data is passed to the PLC CPU during the normal I/O scan. Some HSC modules have outputs that can be configured to turm on and off at various preset levels.
HSC modules typically give you more flexibility in connecting your encoder. You can use single-ended or differential encoder signals, quadrature, and marker pulses. Some HSCs have a built-in homing sequence.
That should be enough to get you started. I can expand upon anything that isn't clear.