In more layman's terms, the wheel speed is determined by a slotted wheel allowing infrared light to pass from an emitter to a receiver on the other side of the wheel.
The direction is determined by the difference in timing between two sets of these emitters and receivers. They are offset, so moving in one direction generates a different pattern then moving in the other direction.
So most likely:
An IR emitter has died
An IR emitter isn't getting power
Something (like lint or fuzz) is blocking an IR emitter or receiver
less likely, but one of these components could have also been bent out of position.