First, load a movie, set the SD MPEG2 for output format from formats menu /bottom left corner/ and then click on Conversion settings button aside of formats menu and you will be presented with the SD MPEG2 encoding Settings panel /image above/. All encoding options will be auto-set based on input movie properties. Aspect ratio is video track's frame aspect and you should not manually set that, encoding type is the default option for encoding - "DVD" is DVD compatible MPEG2 and "MPEG2" is standard MPEG2 movie. You can set that manually before starting the encoding if you wish. System is PAL or NTSC TV system and it is set based on your input movie propertie. If you wish to encode, for example, PAL input movie to NTSC MPEG2 you can set that manually.
Use Set data rate slider to, optionally, set the encoding bitrate if you wish. With CBR /Constant Bit Rate encoding/ turned ON you will get higher quality MPEG2 movie larger in size. Use it only with high quality source movies. Note that for DVD everything above 4500Kbps is very good. Encoding bitrate will be auto set, of course, with optimal, very good quality setting based on selected encoding type /DVD or MPEG2/. Highest setting for DVD compatible MPEG2 file is 8000kbps. If you check Make burnable DVD image ON, at the end of the encoding your MPEG2 movie will be chaptered and authored as DVD and burnable DVD image file /.img/ file will be created for your convenience. Burn it onto blank DVD media with Burn DVD image option from Modules > Tools menu.
QT decode checkbox is there for you if you wish to utilize QuickTime MPEG2 Component for decoding the input file. It will be available for you if the input movie can be decoded with QuickTime and if you have MPEG2 Component for QuickTime installed. It is recommended to check that ON for standard QuickTime input movies /.mov/. Otherwise leave it un-checked.
With Set audio track and Set /or Load/ subtitles You can set the desired audio track for conversion if there is more than one in your input file and set, load or disable the desired subtitle which will be printed on video track during the encoding. If you wish to add external subtitle file as a track to MPEG2 movie /.mpg/ use "Add subtitle(s) to MPEG2" option from Modules > Tools menu after the encoding and before DVD authoring.
When you finish with fine-tuning the encoding settings click on Set button to close the settings panel. Now, you can start the encoding /Start conversion button in the bottom right corner/ or add the file to Queue for later batch processing /top right corner/. If you add it to Queue then load another one, repeat the process with setting the output format and conversion/encoding settings and so on. When you add all files to Queue, click on Show queue button /top right corner/ and Conversion queue panel will be presented with your added files. Click Start and conversion will start, all of the files will be converted/encoded one by one and you can walk away to do some other things. Read more about the Conversion queue here.