Video encoding is the process of converting digital video files from one standard digital video format into another. The purpose of this is for compatibility and efficiency with a desired set of applications and hardware such as for DVD/Blu-ray, mobile, video streaming or general video editing. The encoding process transforms the video and audio data in the file and then does compression according to the specifications of the encoding standard chosen.
Techopedia explains Video Encoding
Video encoding is the process of changing a digital video's format from one standard into another generally for the purpose of compatibility. This is because digital video can exist in different formats with different variables such as containers like .mp4, .flv, .avi and .wmv, and can have different codecs (which facilitate the compression/decompression) and, hence, different qualities meant for different applications.
Video encoding is therefore simply the process of preparing a video for output, which greatly varies depending on the intent and use. For example, videos meant for DVD have to be in MPEG-2 format, whereas those for Blu-ray use H.264/MPEG-4 AVC, which YouTube also uses currently after it moved from the FLV format.