Those of us with, ahem, extensive experience can remember when ASCII was pretty much all there was. Happily, things are much different and better today. Now Unicode is all but universal and, in the U.S. at least, UTF-8 is king. Emacs now uses UTF-8 as its internal format and for most of us UTF-8 is our preferred coding system. Sometimes, though, UTF-8 isn't enough and we have to use some of the other coding systems. Happily, most of us seldom, if ever, encounter this need but when we do Emacs is up to the challenge.
The incomparable Mickey over at Mastering Emacs has an excellent post on how to deal with coding systems in Emacs. If you find yourself needing to use alternate (meaning non-UTF-8) coding systems this post has the information you need to get the job done. He even presents a bit of Elisp to set environment variables specifying the coding system for other applications automatically. Even if all your work is in the ASCII subset of UTF-8 it's worthwhile bookmarking his post against the day that you need to deal with other systems.