Every font, whatever its type, has an encoding, that specifies the correspondence between "logical" characters and character codes. For example, the ASCII encoding specifies that the character numbered 65 (decimal) is an uppercase `A'. The encoding does not specify what the character at that position looks like; there are lots of ways to draw an `A', and a glyph file (see section Glyph files) tells how. Nor does it specify how much space that character occupies; that information is in a metric file (see section Metric files).
TeX implicitly assumes a particular encoding for the fonts you use
with it. For example, the plain TeX macro \', which typesets
an acute accent over the following letter, assumes the acute accent is
at position 19 (decimal). This happens to be true of standard TeX
fonts such as Computer Modern, as you might expect, but it is not true
of normal PostScript fonts.
It's possible but painful to change all the macros that assume particular character positions. A better solution is to create a new font with the information for the acute accent at position 19, where TeX expects it to be. See section Making a PostScript font available.
PostScript represents encodings as a sequence of 256 character names called an encoding vector. An encoding file (`.enc') gives such a vector, together with ligature and kerning information (with which we are not concerned at the moment). These encoding files are used by the Afm2tfm program. Encoding files are also downloaded to the PostScript interpreter in your printer if you use one of them in place of the default encoding vector for a particular PostScript font.
Examples of encodings: the `dvips.enc' encoding file that comes with Dvips in the `reencode' directory is a good (but not perfect) approximation to the TeX encoding for TeX's Computer Modern text fonts. This is the encoding of the fonts that originated with Dvips, such as `ptmr.tfm'. The distribution includes many other encoding files; for example, `8r.enc', which is the base font for the current PostScript font distribution, and three corresponding to the TeX mathematics fonts: `texmext.enc' for math extensions, `texmital.enc' for math italics, and `texmsym.enc' for math symbols.