Why do you need to encode URLs?

From RFC 2936, section 2.4.3:

The space character is excluded because significant spaces may disappear and insignificant spaces may be introduced when URI are transcribed or typeset or subjected to the treatment of word- processing programs. Whitespace is also used to delimit URI in many contexts.

Let's break down your question.
Why do you need to encode URL?
A URL is composed of only a limited number of characters and those are digits(0-9), letters(A-Z, a-z), and a few special characters("-", ".", "_", "~").
So does it mean that we cannot use any other character?
The answer to this question is "YES". But wait a minute, there is a hack and the hack is URL Encoding or Perchantage Encoding. So if you want to transmit any character which is not a member of the above mentioned (digits, letters, and special chars), then we need to encode them. And that is why we need to encode "space" as "%20".
OK? Is this enough for URL encoding? No this is not enough, there's a lot about URL encoding but here, I'm not gonna make it a pretty big, boring technical answer. But If you want to know more, then you can read it from here: https://www.urlencoder.io/learn/ (Credit goes to this writer)

Well, you do so because every different browsers knows how the string that makes up the URL is encoded. converting the space to %20, etc makes that URL/URI portable. It could be latin-1 it could be unicode. It needs normalized to something that is understood universally. Take a look at rfc3986 https://www.rfc-editor.org/rfc/rfc3986#section-2.1