"Transcoding" is the process to adapt your media file formats to your client's capabilities.
Eg. you have AVI files, which aTV can't play natively. PMS takes care of this, converting the media on the fly to mp4/h264/aac.
There are two "qualities" to this -
a - "transcoding", where the media is completely recoded.
b - "direct streaming", if the underlying codecs (eg h264, aac) are good and only the container (eg AVI, mov) has to be changed.
