I figured it out, sort of. The first is actually ascii (255 maps to "ÿ"): http://www.ascii-code.com
So, when I take the string "Queensrÿche" (which IS actually encoded as utf-8) for example:
Decimal Char escaped
81 Q Q
117 u u
101 e e
101 e e
110 n n
115 s s
114 r r
195 - \x{c3}
191 - \x{bf}
99 c c
104 h h
101 e e
It is now printing on my terminal like this:
Queensrÿche
This makes sense, in a way, now because 195 maps to "Ã" and 191 maps to "¿". So, now my question is, why isn't this mapping using a utf-8 table (instead of ascii)? Encode thinks the string is utf-8 (which I assume means the utf-8 flag is on).