Charset (at least how it is used in HippoEDIT context), is font property, controlling which set of characters should be used from font. For non Unicode fonts (or non complete Unicode fonts) you need to specify which charset (native language family) you want to use.

Based on this Windows will select corresponding font file (sometimes for every charset you have different font file) or will make a substitution of the font, if font name you want to use does not have desired character set. In this case Windows will try to find a similar font (by some parameters), which contains full character set, and will use it silently instead of one you have selected. If you do not specify character set, and your text has characters which are not in default charset, and font does not have some glyphs for some character - you will see rectangles for missing glyphs.