The Converter preferences page contains background settings for foobar2000's converter component (foo_converter.dll). This preferences page was updated in version 0.9.6, when the converter was improved to be able to use presets. Many of the settings which were previously on this page are now part of the Converter dialog.
The "Output formats" section allows you to to set the individual encoder formats that you can select from the Converter dialog's Output Formats dropdown menu.
Numbers shown in the "Avg. Bitrate" column are arbitrary; with most of presets they're based on typical bitrates produced by this preset on stereo / 44100Hz sample rate material. With custom presets, these numbers are user-configurable.
The three buttons along the right side do exactly as they would appear to do. The Edit and Remove buttons are ghosted out until an output format is selected from the list.
Command-line encoder folders
This is where you enter the paths to the folders that contain your encoders. If you have multiple encoders in the same folder, you only need to add the path once.