Question on encoding on database.php

Hi
I have a old DB.Now I must do a CakePHP app on this Db.
For the moment I do the scaffolding but I have noted that in edit.php
I see all fields empty.
If I set encoding in database.php like 'encoding' => 'utf8' all works
fine.
Can someone explain me why is this and what is the difference?
Then I must product an XML with this data what is difference in XML if
i use encoding or not?
Many Thanks
Marco

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