Which of the two encode options do I want?

If you are encoding one value to drop into a query string, use the first.

Why did decoding fail?

A stray percent sign that is not followed by two hex digits is invalid, and the browser refuses rather than guessing.

Percent-encode text so it survives being put in a URL, or decode one you have been handed.

For a single parameter value. This encodes & = ? and / as well, which is what you want inside a query string.

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Result

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Which of the two encode options do I want?: If you are encoding one value to drop into a query string, use the first.
Why did decoding fail?: A stray percent sign that is not followed by two hex digits is invalid, and the browser refuses rather than guessing.