A displacement measurement technology using phase-encoded target joint transform correlator (PETJTC) is analyzed in detail. A phase mask is generated electronically and applied to encode the target image. Input images include the phase-encoded target image and the reference image. The joint power spectrum of the input images are obtained and encoded by the same phase mask. Through another Fourier transform the brightest peak in relation to displacement between the reference and target image appears in the correlation plane. In contrast to the displacement measurement based on traditional joint transform correlator, PETJTC could efficiently use the space of the input plane such as spatial light modulator, disperse the autocorrelation item into system noises, and leave the cross-correlation items only, which is convenient for detection. The effects of phase mask with different sizes and different types of noises are analyzed. Results based on digital computation show that PETJTC has a higher performance if the phase mask is bigger and has strong robustness under severe noise. Different displacement measurement technologies are contrasted. PETJTC could accurately detect the displacement. Root mean square errors can remain within 0.1 pixel.