I'm pretty sure what's pictured is a sin/cosine pot, and yes they're continuous rotation. Most potentiometers have stops, but it's not a requirement. Perhaps the stepped effect was the result of the rotation circuit's design. I've thought about introducing a sample and hold on a joystick signal for a similar effect...
"There are painters who transform the sun into a yellow spot, but there are others who, with the help of their art and their intelligence, transform a yellow spot into the sun." Pablo Picasso