An excellent whitepaper at www.microsoft.com/globaldev/handson/dev/muiapp.mspx called "Writing Win32 Multilingual User Interface Applications" describes the whole localization process and describes why using Unicode is so important:
No matter which approach you use to ship a localized product, your application must be fully Unicode enabled. Unicode is a 16-bit character encoding capable of representing most of the languages in common use throughout the world (a far cry from the old 8-bit character encodings such as ANSI, which restrict language support to 220 different characters). A Unicode-enabled application can process and display characters in any of these languages.
Implementing Unicode support frees you from having to worry about the language and codepage support of the platform that your application runs on. For more information about implementing Unicode and shipping a single binary that will run on both Windows 9x and Windows NT, see the article on developing applications using "Microsoft Layer for Unicode" from www.microsoft.com/globaldev/handson/dev/mslu_announce.mspx.