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UTF stands for Unicode Transform Format. This format uses 8 bit blocks for character representation and may use between 1 and 4 of these 8 bit blocks to represent a particular character. This differs from UTF-16 which uses one or two 16 bit blocks, and UTF-32 which uses one 32 bit block.

A key advantage of UTF-8 is that it is backwards compatible with 7 bit ASCII. This means that if a given text file contains only the ASCII values of 0 through 127, the UTF-8 encoded form of the file is identical to the 7 bit ASCII encoded form of the file.

Further reading: