The rsync tool that comes in-the-box with OSX does not support iconv, so that you cannot activate this option in order to void any encoding issue when syncing with rsync.
To use this option, you need to install XCode to compile rsync, by default on OSX 10.6, with default options (64-bit compilation) you don’t have iconv enabled, you just need to precise rsync to compile in 32-bit mode and you are good to sync in UTF-8 now

If you sync from your Mac use

rsync --iconv=UTF8-MAC,UTF8

$ CFLAGS=-m32 CPPFLAGS=-m32 CCASFLAGS=-m32 ./configure --prefix=/usr/local
$ CFLAGS=-m32 CPPFLAGS=-m32 CCASFLAGS=-m32 sudo make install

If you don’t want to install XCode, you can download a compiled version here: rsync-3.0.7 (compiled on OSX 10.6.3)