What does altitude encoding mean in the context of transponders?

Altitude encoding refers to the functionality of transponders in aircraft, where the transponder sends information about the aircraft's current altitude to Air Traffic Control (ATC). This process is crucial for ensuring situational awareness among air traffic controllers and assisting in effective traffic separation. By accurately transmitting altitude data, transponders help ATC maintain safe distances between aircraft flying at different levels, thereby reducing the risk of mid-air collisions and enhancing overall airspace safety.

The other options describe functions that are not related to altitude encoding. For instance, measuring engine temperature is essential for monitoring engine performance but does not pertain to altitude reporting. Fuel efficiency assessment is also a significant aspect of aircraft operation, yet it does not involve altitude encoding. Lastly, while navigation systems are critical for determining an aircraft's route, they operate independently of the altitude encoding provided by transponders.