> How does MySQL know that the query parameter(s) should be UTF-8
> and not ISO LATIN mumble or something else?

By a client executing a command:
  SET NAMES 'utf8'
as far as I can tell.

SET NAMES indicates what character set the client will use
to send SQL statements to the server.
http://dev.mysql.com/doc/refman/5.0/en/charset-connection.html

  Mark

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