This happens in MySQL 4.1/5.x when the Dragonfly database connection is set to utf8 but your tables are in a different collation, for example latin1_general_ci instead of the needed utf8_general_ci.
To fix this problem you may do one of the following things:
1. Fix the database table and column collations
Code::
ALTER TABLE moo_**** DEFAULT CHARSET=utf8 COLLATE utf8_general_ci;
2.Change config.php
PHP:
define('DB_CHARSET', null);
Ofcourse you may choose any other collation if your website is specialy aimed at the Swedish language for example. then you may choose utf8_swedish_ci as collation.