On my RetroPie machine I wanted a hardware volume knob — the games I play use a handful of emulators, and there's no unified software interface for controlling the volume. The speakers I got for my cabinet are great, but don't have their own hardware volume knob. So with a bunch of googling and trial and error, I figured out what I need to pull this off: a rotary encoder and a daemon that listens for the signals it sends.
A rotary encoder is like the standard potentiometer (i.e., analog volume knob) we all know, except (a) you can keep turning it in either direction for as long as you want, and thus (b) it talks to the RPi differently than a potentiometer would.
I picked up this one from Adafruit, but there are plenty others available. This rotary encoder also lets you push the knob in and treats that like a button press, so I figured that would be useful for toggling mute on and off.