The encoder disc is really a 1-dimensional input. Adding a second opto-detector that is one half-bit out of phase gives you two simultaneous inputs and yes, it comes out to a 2-bit Grey code.

00 -> 01 -> 11 -> 10 -> 00

Quadrature is a gray code with two offset spoke sets so that you can tell direction and rotation by which pulse precedes the other. http://www.ni.com/white-paper/4763/en/