This episode explains how computers represent characters using binary codes, introducing the concept of a character set. It details ASCII as a foundational 7-bit and then 8-bit standard for English characters and symbols, highlighting how uppercase and lowercase letters, numbers, and punctuation each have distinct binary values. The text then introduces Unicode as a more expansive 16-bit or 32-bit character set designed to accommodate characters from various global languages and even emojis. A key distinction is drawn between numeric characters as text (their ASCII representation) and their actual numerical binary values, emphasizing that arithmetic cannot be performed directly on character data and requires conversion.