What is Demuxing? And why do you have to demux audio?

When Gnot calls up DVD2AVI to demux the audio tracks, from what I understand is that it does something like extracting a ac3 file from the VOBs and there seems to be another mp3 file created. What is that and what is it for?

Lastly when you're done with all the cropping, bitrate settings and proper to encode again, it seems that another encoding takes place again (with the program besweet, that's as far as I can understand). Why is there so much demuxing/encoding/transcoding going on and what is that for?

Cheers.