The available character encodings are:
This is the character set used for English text.
This is used for Western European languages.
This is used for Eastern European languages.
You should select the one that matches the character set you are using. In some cases, dictionaries will support more than one encoding. A dictionary might, for example, accept accented characters when Latin1 is selected, but accept email-style character combinations (like 'a for an accented a) when 7-Bit/ASCII is selected. Please see your dictionary's disctribution for more information.