Encoding refers to the character encoding used to describe the page. BuiltWith can detect this as it is typically described at the top of the page or from within meta tags. Telling the browser what character encoding is being used allows the browser to render the correct characters on the screen, it also is the reason why visiting a Chinese language website will render in Chinese characters and not a Western character set and vice versa.
The majority of the top internet sites use UTF-8 encoding, a Unicode standard which is required by all internet protocols to be identifiable.