Character encodings are systems that assign unique numerical values to characters, allowing computers to represent and manipulate text. Different encodings, like ASCII and UTF-8, define how characters such as letters, numbers, and symbols are stored in digital formats. This ensures that text appears correctly across various devices and platforms. The choice of character encoding can affect data compatibility and display. For example, UTF-16 can represent a wider range of characters than ASCII, making it suitable for languages with extensive character sets. Understanding character encodings is essential for software development, data processing, and web design.