Transcoding is the act of converting digital content from one (usually lossy) format to another. It involves first decoding/decompressing the original data to a raw intermediate format (ie, PCM for audio or YUV for video) that mimics standard playback of the lossy content and then re-encoding this into the target format.
Compression artifacts are cumulative, therefore transcoding between lossy codecs causes a progressive loss of quality with each successive generation. For this reason it is generally discouraged unless unavoidable. For instance, if an individual owns a digital audio player that does not support a particular format (ie, Ogg Vorbis and the Apple iPod) the only way for the owner to use content encoded in that format is to transcode it to a supported format.
Transcode video processing software
Transcode is also a free tool for video conversion released under the GNU General Public License. It can be used to convert between many different video and audio codecs and packaging formats.