Why do we need Unicode?

In the early days, all that existed was ASCII. This was okay, as all that would ever be needed were a few control characters, punctuation, numbers and letters like the ones in this sentence. Unfortunately, today's strange world of global intercommunication and social media was not foreseen, and it is not too unusual to see English in the same document 

But for argument's sake, lets say Joe Average is a software developer. He insists that he will only ever need English, and as such only wants to use ASCII. This might be fine for Joe the user, but this is not fine for Joe the software developer. Approximately half the world uses non-Latin characters and using ASCII is arguably inconsiderate to these people, and on top of that, he is closing off his software to a large and growing economy.

Therefore, an encompassing character set including all languages is needed. Thus came Unicode. It assigns every character a unique number called a code point. One advantage of Unicode over other possible sets is that the first 256 code points are identical to ISO-8859-1, and hence also ASCII. In addition, the vast majority of commonly used characters are representable by only two bytes, in a region called the Basic Multilingual Plane (BMP). Now a character encoding is needed to access this character set, and as the question asks, I will concentrate on UTF-8 and UTF-16.

Memory considerations

So how many bytes give access to what characters in these encodings?

• UTF-8:
  • 1 byte: Standard ASCII
  • 2 bytes: Arabic, Hebrew, most European scripts (most notably excluding Georgian)
  • 3 bytes: BMP
  • 4 bytes: All Unicode characters
• UTF-16:
  • 2 bytes: BMP
  • 4 bytes: All Unicode characters

It's worth mentioning now that characters not in the BMP include ancient scripts, mathematical symbols, musical symbols, and rarer Chinese/Japanese/Korean (CJK) characters.
If you'll be working mostly with ASCII characters, then UTF-8 is certainly more memory efficient. However, if you're working mostly with non-European scripts, using UTF-8 could be up to 1.5 times less memory efficient than UTF-16. When dealing with large amounts of text, such as large web-pages or lengthy word documents, this could impact performance.

Encoding basics

^{Note: If you know how UTF-8 and UTF-16 are encoded, skip to the next section for practical applications.}

• UTF-8: For the standard ASCII (0-127) characters, the UTF-8 codes are identical. This makes UTF-8 ideal if backwards compatibility is required with existing ASCII text. Other characters require anywhere from 2-4 bytes. This is done by reserving some bits in each of these bytes to indicate that it is part of a multi-byte character. In particular, the first bit of each byte is 1 to avoid clashing with the ASCII characters.
• UTF-16: For valid BMP characters, the UTF-16 representation is simply its code point. However, for non-BMP characters UTF-16 introduces surrogate pairs. In this case a combination of two two-byte portions map to a non-BMP character. These two-byte portions come from the BMP numeric range, but are guaranteed by the Unicode standard to be invalid as BMP characters. In addition, since UTF-16 has two bytes as its basic unit, it is affected by endianness. To compensate, a reserved byte order mark can be placed at the beginning of a data stream which indicates endianness. Thus, if you are reading UTF-16 input, and no endianness is specified, you must check for this.

As can be seen, UTF-8 and UTF-16 are nowhere near compatible with each other. So if you're doing I/O, make sure you know which encoding you are using! For further details on these encodings, please see the UTF FAQ.