Component or full URL?
Use "Component" to encode a single piece, such as a query-string value or a path segment: it escapes everything except letters, digits and - _ . ! ~ * ' ( ). That is what you want for a search term containing &, = or /. Use "Full URL" when you have a complete address and only want to escape characters that are illegal in it, such as spaces and non-ASCII letters, while keeping the structure characters : / ? & = # intact.
Non-ASCII characters
Characters outside ASCII are first converted to UTF-8 and then each byte is written as %XX, so "é" becomes %C3%A9. That is the encoding browsers and servers expect today. Decoding reverses it; if a % is not followed by two hex digits you get a clear error rather than a silent wrong answer.
The plus sign
In HTML form submissions (application/x-www-form-urlencoded), a space is written as + instead of %20. When decoding data copied from such a query string, tick "Decode + as space". Leave it off for ordinary URL paths, where + really means a plus.
Example
Encoding a query value that contains spaces, a euro sign and reserved characters.
Input
price=10€ & size=M/L
Output
price%3D10%E2%82%AC%20%26%20size%3DM%2FL
