No Character Encoding detected! But Why?

Yes, I understand I have no character encoding on www.ndose.com/index.html. But my question is, what is the point of character encoding. I have never used it in the past, and it does not seem to change the way my page is displayed whatsoever. I have read some documentation about it but it isnt clear as to why you should use character encoding and it seems there are many of them you could use for standard english encoding.

So my questions are...

Why character encoding?
Should I use it? What will it do?
If so, which one should I use... it sounds as if utf-8 is the standard?