The encoding/exemplifying distinction is in part an attempt to make phrases like "the round square" or "a nonexistent Pegasus" intelligible, without violating consistency or identity parameters in general. The SEP article says:
Earlier we distinguished between two versions of sophisticated Meinongianism. The first, based on the distinction between nuclear and extra-nuclear properties, was found lacking. We turn now to the second, based on the distinction between encoding and exemplifying a property, focusing on Zalta’s version of the view, which is the most fully developed in the literature. Whereas Parsons distinguished different kinds of properties, restricting the comprehension principle to only nuclear properties in the hope of thereby avoiding the problems plaguing the naive comprehension principle, Zalta distinguishes two different modes of having a property for the same effect. Exemplifying a property is the familiar way in which an individual has a property; it is roughly what most metaphysicians have in mind when the speak of instantiating a property. Obama exemplifies humanity, my chair exemplifies being comfortable, and the fig tree in my backyard exemplifies needing water. What the comprehension principle does is say not what properties object exemplify, in this sense, but rather what properties they encode. So, for any condition C on properties, there is an object that encodes exactly those properties, which leaves open whether or not those objects also exemplify those properties.
Now states of affairs are represented not by singular noun terms, but noun phrases, like "A's loving B." They are somewhere between possible facts as (in Quine's immortal words) "sentence-like slices of reality" and objects as the intended referents of singular noun terms. The propositions that map to facts can be true or false; concepts can have instances or not; objects can exist or not; states of affairs, then, can obtain or not.
My question is: are states of affairs an intuitive example of something encoding properties vs. exemplifying them? For example, take the SoA "the golden mountain's being 70 kilometers from the base up." This SoA is not itself golden, a mountain, or 70 kilometers in height, but there is certainly something about those properties that "attaches to" the SoA "essentially," so if we are speaking of essential but non-exemplifying relations, that's what encodings are supposed to be.
Now, I looked over some of what Zalta himself has said to situate states of affairs in his abstract object theory, and he seems to talk of an SoA as something that itself gets encoded by an object, vs. being the equivalent of an object into which properties otherwise understood are encoded. At any rate, there seems like some mental elbow room to underwrite talk of round squares and explicitly inconsistent things besides by saying stuff like "a square's being round," or "a circle's having straight finitesimal sides" (note: there is a theory that a circle is actually an infinilateral polygon, with infinitely many infinitely small straight sides; hence the qualifier in the preceding). These states of affairs "exist" (let us suppose) and encode the inconsistent properties at issue, but it is impossible for these states of affairs to obtain, because neither do they nor can anything else exemplify the properties encoded into the SoA in turn. (So here, a state of affairs obtains when "and only when" the properties that it encodes are also exemplified.)