if i have a user entering data into a rich text editor (tiny editor) and submitting data that i am storing into a database and then retrieving to show on other dynamic web pages, why do i need encoding here.
Is the only reason because someone might paste javascript into the rich text editor? is there any other reason ?
Security is the reason.
The most obvious/common reason is Cross-Site-Scripting (XSS). It turns out to be the root cause of the security problems you might witness in your site.
Additional, as shown in below comments, the layout of your site can also be screwed up.
You need Microsoft Anti-Cross Site Scripting Library
More Resources
http://forums.asp.net/t/1223756.aspx