Bitstreaming bypasses any internal processing and sends the native DSD audio straight to your DAC.
You can bitstream as native 1-bit 2.8MHz DSD, or a 16-bit 176.4kHz DoP stream.
DoP is a reformatting of the DSD stream, it is not a conversion, and is 100% DSD.
It simply fits the 1-bit 2.8MHz stream into a 16-bit "container". (2.8MHz ÷ 16 = 176.4kHz)
Neither of these bitstreams have a PCM conversion step, or allow you to perform any processing. (even simple things like adjusting the volume)
DSD Encoding is the process of converting PCM audio to DSD.
DSD Encoding will work on both PCM files and DSD files.
The reason you might want to use DSD Encoding with native DSD files, is that having Media Center perform an intermediate PCM conversion allows you to process the audio for things like volume control, volume leveling, equalization, downmixing, or other DSP processing, while still outputting DSD at the end.
DSD Bitstreaming takes priority over DSD Encoding.
If you have both enabled, PCM audio will be encoded to DSD, and DSD audio will simply be passed through to the DAC with no intermediate PCM stage or processing.