Open Special opens files other than Mathematica notebooks, or notebooks modified outside Mathematica.
The dialog box lists the following choices for how the file will be interpreted.
File reading method
Ignore File Outline Cache
Opens a notebook without reading the cached outline of the notebook. This increases the time taken to open a notebook. It is typically used for opening notebooks whose outline cache has become corrupted.
All In One Cell
Puts the entire file in one cell.
New Cell At Every Line
Puts every line of the file into a separate cell.
New Cell At Every Blank Line
Breaks the file into cells at every blank line.
New Cell At Every Two Blank Lines
Breaks the file into cells at every two blank lines.
Extracts only the Macintosh resources of the file (PICT, TEXT, sound, and so on), ignoring the rest. This can be used to get information out of certain types of files that ordinarily cannot be opened. Note that you can open the Scrapbook, PICT, and EPSF files directly without using this option.
Uses the specified character encoding standard to determine how raw characters in the file are translated. The pop-up menu lists the character encoding files currently available to Mathematica.
$SystemCharacterEncoding uses the standard character encoding for your computer system.
See The Mathematica Book: Section 2.8.7, Section 2.8.8.