In Pathauto 4.7 a transliteration system converts non ASCII128 characters into ASCII128. This system was required and could only be updated with changes to the code.
Pathauto 5.x and 6.x-1.x transliteration file
In Pathauto 5.x and 6.x-1.x users have control over the exact functioning of the transliteration by means of an external file.
The module itself is shipped with small file called i18n-ascii.example.txt. This file contains example transliterations for common languages. To enable transliteration on your site, rename this file to i18n-ascii.txt and then check the "Enable Transliteration" setting on the Administer > Site Configuration > Pathauto page.
You can expand on the example file or remove some of the characters to get a set of characters that are suited to your site.
Expanded Transliteration File
You can also use this full transliteration file for every UTF-8 character. This file provides a basis which should be edited and reduced to your site specific needs, but it can be helpful when building your file. Be sure to edit it and transfer it with tools that support UTF-8.
Transliteration in 6.x-2.x onwards
From Pathauto 6.x-2.x and onwards, the path transliteration is handled by the Transliteration module, and the i18n-ascii.txt file will thus no longer be used.