John Collins
En-Route
I typed 170 -- the original quote was 150
The transponder only sends pressure altitude with 100 foot precision, so the controller only sees 3000, 3100, 3200. Typically the encoder will jump to the next higher altitude corresponding to the 50 ft mark on the altimeter if they are in perfect correspondence. So assuming the altimeter reads 2950 to 3049, the encoder would read 3000, at 3050 to 3149 the encoder would read 3100 and so on. Of course one never has perfect correspondence between an altimeter and the encoder and mere mortals don't always fly at precisely the assigned altitude. So it is easy to be within IFR standards for holding altitude and to have an encoder reporting 200 ft off assigned altitude as this can be a result of a difference of only 50 ft in correspondence between the altimeter and encoder.
Most aircraft use a parallel encoder which transmits the altitude using a "gray" code. This is not the standard binary value sequence, 0000 0001 0010 0011 0100 0101 0110 0111 1000 1001 ... . In the gray code, only a single bit is allowed to change at any time when the altitude changes between two adjacent values. This is because if the encoder signal is sampled during the transition between altitudes, any bit that needs to change may be sampled as either a 1 or a 0 while in transition. So when a value of 0011 is changing to 0100, three of the four bits are changing at the same time, which means that any altitude that these three bits can represent may be read by the transponder and sent to ATC in error. The gray code solves this problem by only allowing one bit at a time to change when the altitude changes, so the gray code sequence is something like this for the same values represented by the regular binary sequence: 0000 0001 0011 0010 0110 0100 0101 0111 0110 0100 ... . This way the altitude reported will only be the original value or the new value and an erroneous value will not be reported.
Note: this is why when an encoder or transponder has a error that one of the signal lines being open or shorted, the reported altitude can be way off by several thousand feet.