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What do "ripping" and "encoding" mean?
"Ripping" refers to the process of extracting audio data from an audio CD (generally via Digital Audio Extraction, rather than via an analogue recording link) and storing it as digital audio data of some form on your PC hard disk.
"Encoding" refers to the process of taking uncompressed digital audio data (e.g. WAV files on a PC, AIFF files on a Mac) and compressing them according to a particular compression scheme, such as MP3.
So "ripping" would take a CD track and make a file on your PC hard disk. "Encoding" would take, for example, a WAV file on your PC and make, for example, an MP3 file from it. If you take a track from an audio CD and create an MP3 file on your hard disk from it directly, then you are ripping and encoding in one step.