This attribute is used in FILE or IDF elements to allow binary data to be placed in the IDF document. This is a convenient means of including binary, non-text data such as images, "in-line" rather than as separate files.
When ENCODING is set, any body text found in the element will be converted from the base64 (in which the binary data is encoded) and processed according to the FILETYPE. If it is not set, the characters in the body text will used literally – which in the case of binary data, would be meaningless.
IDF scripts commonly start with an XML instruction for which the default encoding is UTF-8.