Decimal to Binary encoder in proteus

The grey signals are "unknown", and they propagate through the gates, eventually being fed back to the input, so the unknown state persists. This is something of a quirk with logic simulators, but also something of a warning. It indicates that you may not be able to predict how the circuit powers up. In real life, the state will randomly come up as 1 or 0, and the circuit proceeds from there. But in the absolutely strict environment of the simulator, unknown is unknown.

You can get the circuit to "stabilize" by temporarily forcing those signals high or low (with more parts required). You may also find some help by reading this question

The display under the motor shows the RPΜ (rounds per minute).

The rate of the pulses that you get at the output pins (encoder) depends on the pulses per revolution property of the motor.

Here is what you see when you open the motor properties (these are the default settings)

The zero load RPM is 360 @12v supply (nominal voltage), and the pulses per revolution at the output pins is set to 24. Note that the motor load is set to 50%.

If you apply 12v supply to the motor, the display should show 180 RPM (which is 50% of the 360RPM) and the pulses at the output should be $$\frac{180RPM}{60sec} \times 24 =72Hz \ (72\ pulses\ per\ second)$$

That is indeed what you will see if you simulate the circuit with 12v connected to the motor and a frequency meter to show the output: