I am trying to understand the example code about Encoding the states of DIP switches into a number. I don’t understand the code they use for encoding the binary into a number.

 * This example code is in the public domain
 *
 * Tutorial page: https://arduinogetstarted.com/tutorials/arduino-dip-switch
 */

#define POSITION_NUM 4
#define ON LOW
#define OFF HIGH

// define the pins connected to the dip switch
const int SWITCH_PINS[] = { 2, 3, 4, 5 };

void setup() {
  // Initialize serial communication
  Serial.begin(9600);

  // Set the DIP switch pins as inputs with pull-up resistors enabled
  for (int i = 0; i < POSITION_NUM; i++)
    pinMode(SWITCH_PINS[i], INPUT_PULLUP);
}

void loop() {
  int encoded_state = 0;
  for (int i = 0; i < POSITION_NUM; i++) {
    int state = digitalRead(SWITCH_PINS[i]);

    if (state == ON)                                // 
      encoded_state |= 1 << (POSITION_NUM - i - 1); // this is what I don't understand
  }
}

I hope you guys can give me an explanation for the part I’ve marked in the code.