Video transcoding is a step to convert your videos into an internet-friendly format to support adaptive streaming. Your uploaded video is converted into multiple resolutions i.e. from 240p to 1080p.
These resolutions are there to auto-switch the video player from one resolution to another based on the viewer's internet speed on the fly. This means that the video player can switch from 240p to 540p or 1080p within a few seconds. It can either switch to a bigger or a lower resolution automatically. The decision is made based on the viewer's changing internet speed.
There are two main benefits of this approach: