In other words, when it comes to XML, case-folding simply means uppercasing.
Source encoding is done when an XML document is parsed. Upon creating an XML parser, a source encoding can be specified (this encoding can not be changed later in the XML parser's lifetime). The supported source encodings are ISO-8859-1, US-ASCII and UTF-8. The former two are single-byte encodings, which means that each character is represented by a single byte. UTF-8 can encode characters composed by a variable number of bits (up to 21) in one to four bytes. The default source encoding used by PHP is ISO-8859-1.