Video comes in many formats, resolutions, and bitrates. Transcoding is the process of taking content, decompressing, altering, and recompressing it. Usually, when we talk about transcoding, we're referring to altering a file's video or audio format, or codec. However, video transcoding may also refer to adding watermarks or other types of graphic elements to your content.
It's important to note that transcoding is not the same as 'transrating' or 'transsizing,' which mean the following:
Transrating: This is the process of altering a video's bitrate.
Transsizing: This refers to resizing a video or changing its resolution.