How do I create a knob like on my amplifier
What you need in a rotary encoder, they have two outputs that generate pulses which are then decoded to read the direction of rotation.

  

Refer to http://playground.arduino.cc/Main/RotaryEncoders

To control the volume you can use Arduino to drive a volume control chip like PGA2311.
There are even 4 channel versions like PGA4311

You can also control digital potentiometers like MCP41xxx/42xxx