Does Convert Automatically Transcode all files in a library?

For Firestick 4k Does Convert Automatically Transcode all files in a library or just the one playing? Is it changing the bandwidth, codec or both? I have large files (DVRMS M2TS) that stutter and I get network bandwidth warning unless I select Convert Automatically. I am getting 90mbps speed on firestick wifi.

It’s a dynamic decision and is done on a case-by-case basis, in realtime (if the server machine is upto the task). There are numerous parameters which influence the outcome. If you want to watch the decision process, enable “debug” logging for the server,
play a file
fetch the server logs
then look into the Plex Media Server.log and seek for lines starting with MDE: