Character encoding determines the method used to represent character value greater than 0x7F (decimal 127). Such double-byte characters constitute the "high ASCII" set; whereas FrameMaker characters, except in the Japanese version, are all single-byte. The default for XML output is UTF-8:
If your XML output is to be rendered by Web browsers, be aware that even though UTF-8 is the XML standard encoding, many browsers do not support it. The Mif2Go default is to claim UTF-8 as the encoding, but to use numeric references of the form &#nnn; for all characters that would have to be encoded; this satisfies all browsers. That is, with default settings, Mif2Go does not actually produce any characters with values greater than 127 using the UTF-8 encoding; instead, Mif2Go uses entities for such characters, readable under any eight-bit encoding scheme.
The setting for XMLEncoding controls the content of the encoding attribute of the XML declaration. If you set Encoding=UTF-8, you get real UTF-8 encoding (two characters) in place of the numeric character references. However, you can still force use of numeric references by also setting NumericCharRefs=Yes.
While Encoding=None is not strictly compliant, this setting can be useful in places like Russia, where almost the entire text would otherwise consist of numeric character references. Encoding=None provides a 6:1 reduction in such references.