Find the side with three solder pads. This side controls the rotating knob. Solder a black wire to the center pad. Solder a blue wire to the leftmost pad and a green wire to the rightmost pad.
Flip the encoder over and find the side with two solder pads. This side controls the button that clicks when you press down on the knob. Solder another black wire to the pad on the left (with the encoder facing right-side up) and a yellow wire to the pad on the right.
Press the rotary encoder down inside the 3d printed holder so the knob sticks out the bottom. It should fit snugly, with none of the pads touching each other and no accidental solder bridges.
Solder the yellow wire (from the 2-pin side) to pad A5. Solder the blue and green wires to pins A2 and A3 respectively.
Plug in your Circuit Playground and test to be sure the knob works. Pressing down on the knob should turn the lights on and off. Twisting the knob should change the brightness (if your Circuit Playground onboard switch is set to the left) or the animation speed (if it's set to the right).