Tom
Mode C is sent in pulses - so the analogue/digital argument is irrelevant. If you had to pick one, you'd say "digital".
For a simple explanation look here:
http://www.airsport-corp.com/modec.htm
The power output is 150 to 350 watts - but it's pulsed, so the "mean" power is a lot less. depending on how often it's interrogated and the code it happens to be sending. But it's the instantaneous power that defines the output stage rating, and 350 watt UHF power transistors are expensive, hence the use of thermionic devices in most transponders. Those need a finite time to warm up. That's the main reason for switching the device to standby (rather than OFF) once the engine is started.
For info on all-solid-state (ie non-thermionic PA stage) transponders, see here:
http://www.ultralight.nu/garmin.htm
A&C
I wasn't aware that encoders are heated - any more than altimeters are. Where does that information come from? Is that for ones mounted in unheated/unpressurised avionics bays, rather than those mounted behind the panel and connected to the static line?