If you're having problems with localized characters (åäöéü etc) not showing up correctly in irssi, you might have a problem with your character encoding.
UTF-8 is an industry standard encoding that enables us to use any character within the Unicode table, which includes more than 100,000 characters!
Check Locale/Character Encoding
To check what character encoding you're using in the shell, use this command:
locale
It will print something ending with ".utf8" if you're using UTF-8.
Change to UTF-8
If you're not currently using UTF-8 in your shell, you can change either by using the shell-setup program, or by using this command:
echo 'export LC_ALL="en_US.UTF-8"' >> ~/.profile
Next time you log in your shell will be using UTF-8.
UTF-8 in irssi
To use UTF-8 in irssi, type this in the command prompt in irssi:
/set term_charset UTF-8 /save
Important Info
Remember that you have to change the charset in your SSH-client as well! Use the translation option in PuTTY for example (Settings -> Window -> Translation -> Character set translation).
If you're using Screen, it will have to be (re)started from a shell running UTF-8.
(The basic rule is to use UTF-8 all the way down the chain, SSH-client -> Shell -> Screen -> Irssi)
Backwards Compatability
UTF-8 is backwards compatable, which means you will be able to show characters written in ASCII and ISO for example. Other users still stuck with ISO (old mIRC version for example) might not be able to read all your UTF-8 characters however.
Use this command if you want to send text in ISO (note however that you will not be able to send UTF text with this setting):
/set recode_out_default_charset iso-8859-1