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What is the difference between encoding and decoding?

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opening/playing/reading/watching a file (Decoding) and making a file (Encoding)
there are many different ways to read/write a bunch of "1's" and "0's." A files extention (.wav; .mp3; .iso; etc) explains how that file should be read as/written as. For example, this paragraph could be written in Spanish and generally say the same thing with the same general letters.
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