Encoding used for reading the output of external commands. When empty, encoding is not converted. This is used for :make, :lmake, :grep, :lgrep, :grepadd, :lgrepadd, :cfile, :cgetfile, :caddfile, :lfile, :lgetfile, and :laddfile.

This would be mostly useful when you use MS-Windows and set 'encoding' to "utf-8". If +iconv is enabled and GNU libiconv is used, setting 'makeencoding' to "char" has the same effect as setting to the system locale encoding. Example:

:set encoding=utf-8
:set makeencoding=char  " system locale is used

(default "")