Hi and welcome,
Most of the newer templates (such as Text/Encode URL) are lacking documentation, and we are working on filling in the gaps. Regardless, we always strive to make the templates somewhat self documenting by using meaningful names for elements ... In this specific case, the template converts unencoded text (passed in through the <Text> trigger) into URL-encoded text (passed out through the <Encoded Text> exit).Note that there's no concrete requirement for the input to be a correctly formed (unencoded) URL - any given text will be encoded.
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