In other words, decode converts specified character code to perl character string?

Exactly. decode converts a string of bytes into a string of Perl characters. Perl characters have no encoding (well, of course they have some representation deep inside, but that's nothing to care about). The terminal, as everything else outside the Perl world, communicates over byte strings, and terminals nowadays expect UTF-8 encoded byte strings.

Interfaces within Perl should, unless explicitly documented otherwise, exchange Perl characters.