Plain English Meaning
An altimeter that can send the aircraft's altitude electronically to ATC through the transponder, so controllers see the aircraft's altitude on their radar screen.
Full Definition
A modification to the standard pressure altimeter that allows it to electronically transmit the aircraft's pressure altitude to a transponder, which then sends that altitude information to air traffic control radar. The encoding altimeter converts the mechanical altitude reading into a digital signal referenced to a fixed pressure of 29.92 inches of mercury, regardless of the altimeter setting shown in the Kollsman window.