This article is from the ZTerm FAQ, by Les Jones email@example.com with numerous contributions by others.
Unless you know better, use Smart MacBinary, which will
automatically select the correct transfer mode. The major exception
is if you are uploading non-text files, such as GIFs or .zip files,
which PC users will use. In that case, use binary to prevent Finder
information from being sent.
This reason this setting is so important is because of the Mac's
unique file format. Macintosh files have two forks, or parts -- the
data fork and the resource fork. The data fork holds data, which is
usually text. The resource fork holds resources such as compiled
code, pictures, sounds, etc. Text files are usually all data.
Applications are mostly resources. This two part structure is
unique to the Mac. If you send Mac files to other types of
computers, the files will be damaged. Using MacBinary transfers
prevents this damage.