Don't put HTML-encoded data in the database. It should be raw text until the time you spit it onto the page (at which point you should use htmlspecialchars().
You need to make sure that both your database and your page are using UTF-8:
- ensure your tables are CREATEd with a UTF-8 collation;
- use mysql_set_charset after connecting to ensure the connection between MySQL and PHP is UTF-8;
- set the
Content-Type of the page to text/html;charset=utf-8 by header or meta tag.
You can get away with using a different encoding such as the default latin-1 on the database end and the connection if you treat it as bytes, but case-insensitive comparisons won't work if you do, so it's best to stick to UTF-8.