Cheap old style ball mouse. PS/2 interface.
Top removed from the mouse, the ball fits in the gap in the centre. The slotted discs are visible which contact the ball & move relative to the surface the mouse is on.
PCB removed from the shell. Pairs of IR LEDs & Phototransistors make rotary encoders with the slotted discs. The microswitches read the mouse buttons & wheel.
IC in the centre interfaces with the PC over a PS/2 connection.