Of course. You can read a text file in binary mode without it getting corrupted, but not vice versa.

Not quite sure, but I think binary mode adds a layer of encoding to the transfer to ensure no data is lost (this is transparent).
FTP was originally created to transport only text data, and if I'm not mistaken uses 7 bits per byte (discarding one) just like SMTP.
Therefore binary data needs to be encoded from 8 down to 7 bits before being sent over the line.
Text data already fits in 7 bits (unless it's UTF-8 for exampl with the high bits in use, for example Chinese) and therefore needs no special treatment.