Video encoding is the process for changing a video from one format to another by altering the resolution and/or the bitrate. Normally the result of this process is a movie with a different compression. For a proper encoding you need a piece of software and/or hardware, which is called codec.
Video decoding is also called decryption, most of the time it means DVD decoding, it can remove or bypass the codec program and have access to the DVD or video you want. A very easy to use and powerful video decrypter is called DVD Ghost, download link: http://www.clonedvd.net/dvd-ghost/