You don't need to encode data that is already encoded. When you try to do that, Python will first try to decode it to unicode before it can encode it back to UTF-8. That is what is failing here:

>>> data = u'\u00c3'            # Unicode data
>>> data = data.encode('utf8')  # encoded to UTF-8
>>> data
'\xc3\x83'
>>> data.encode('utf8')         # Try to *re*-encode it
Traceback (most recent call last):
  File "<stdin>", line 1, in <module>
UnicodeDecodeError: 'ascii' codec can't decode byte 0xc3 in position 0: ordinal not in range(128)

Just write your data directly to the file, there is no need to encode already-encoded data.

If you instead build up unicode values instead, you would indeed have to encode those to be writable to a file. You'd want to use codecs.open() instead, which returns a file object that will encode unicode values to UTF-8 for you.

You also really don't want to write out the UTF-8 BOM, unless you have to support Microsoft tools that cannot read UTF-8 otherwise (such as MS Notepad).

For your MySQL insert problem, you need to do two things:

• Add charset='utf8' to your MySQLdb.connect() call.

• Use unicode objects, not str objects when querying or inserting, but use sql parameters so the MySQL connector can do the right thing for you:

  artiste = artiste.decode('utf8')  # it is already UTF8, decode to unicode
  
  c.execute('SELECT COUNT(id) AS nbr FROM artistes WHERE nom=%s', (artiste,))
  
  # ...
  
  c.execute('INSERT INTO artistes(nom,status,path) VALUES(%s, 99, %s)', (artiste, artiste + u'/'))
  

It may actually work better if you used codecs.open() to decode the contents automatically instead:

import codecs

sql = mdb.connect('localhost','admin','ugo&(-@F','music_vibration', charset='utf8')

with codecs.open('config/index/'+index, 'r', 'utf8') as findex:
    for line in findex:
        if u'#artiste' not in line:
            continue

        artiste=line.split(u'[:::]')[1].strip()

    cursor = sql.cursor()
    cursor.execute('SELECT COUNT(id) AS nbr FROM artistes WHERE nom=%s', (artiste,))
    if not cursor.fetchone()[0]:
        cursor = sql.cursor()
        cursor.execute('INSERT INTO artistes(nom,status,path) VALUES(%s, 99, %s)', (artiste, artiste + u'/'))
        artists_inserted += 1

You may want to brush up on Unicode and UTF-8 and encodings. I can recommend the following articles:

• The Python Unicode HOWTO

• Pragmatic Unicode by Ned Batchelder

• The Absolute Minimum Every Software Developer Absolutely, Positively Must Know About Unicode and Character Sets (No Excuses!) by Joel Spolsky

In Python 3, UTF-8 is the default source encoding (see PEP 3120), so Unicode characters can be used anywhere.

In Python 2, you can declare in the source code header:

# -*- coding: utf-8 -*-
....

This is described in PEP 0263.

Then you can use UTF-8 in strings:

# -*- coding: utf-8 -*-

u = 'idzie wąż wąską dróżką'
uu = u.decode('utf8')
s = uu.encode('cp1250')
print(s)

A more direct answer:

In Python 3+: you don't need to declare any encoding.

UTF-8 is the default. Make sure the file is encoded in UTF-8 without BOM. Some Windows editors don't have it by default. It won't hurt to declare it, and some editors may use it.

In Python 2: always.

The default is OS dependent. As first or second line line of your files put this comment:

# -*- coding: utf-8 -*-

And remember: this is just about your source code files. Now in the 3rd millennium the string type does not exist anymore. You must take care of the type text, that is a sequence of bytes and an encoding. You'll still have to define your encoding in all input and output operations. These operations will still be dependent on your environment, so it's still better to follow the pythonic rule: Explicit is better than implicit.

Rather than mess with .encode and .decode, specify the encoding when opening the file. The io module, added in Python 2.6, provides an io.open function, which allows specifying the file's encoding.

Supposing the file is encoded in UTF-8, we can use:

>>> import io
>>> f = io.open("test", mode="r", encoding="utf-8")

Then f.read returns a decoded Unicode object:

>>> f.read()
u'Capit\xe1l\n\n'

In 3.x, the io.open function is an alias for the built-in open function, which supports the encoding argument (it does not in 2.x).

We can also use open from the codecs standard library module:

>>> import codecs
>>> f = codecs.open("test", "r", "utf-8")
>>> f.read()
u'Capit\xe1l\n\n'

Note, however, that this can cause problems when mixing read() and readline().