It doesn't do any hardware encoding as there is no need for any encoding. Hardware encoding is only required if you are trying to watch analogue TV - the TV card will encode the TV signal as MPEG2 and then the PC will handle the decoding of this. This is a far superior option to the old days before MPEG2 encoder chips were available.

When you view Freeview|HD on a TV all the card the card does is pass the H.264 MPEG TS stream straight to the PC for decoding. You can use a software H.264 codec (only average quality and minimul mid to high end dual core CPU required) or a video card capable of H.264 hardware acceleration and a H.264 codec such as the one from PowerDVD7 or PowerDVD8 that supports hardware acceleration. This will take all the load of the CPU as the video card does all the hard work.