The gauge mechanism allows for accurate measurement of polycentric joints. Telescopic endblocks compensate for changes in distance between the two mounting points as the limb moves.
Suggested reading for additional information on goniometry: Legnani G, Zappa B, Casolo F, Adamini R, Magnani PL. A model of an electro-goniometer and its calibration for biomechanical applications. Med Eng Phys. 2000 Dec;22(10):711-22.