@ sdnd2000

TIMTOWTDI  =.  there is more than one way to do it

FWIW, StringBuilder is not necessary, although this example which i've tested in LINQPad v4.42.01 does use StringBuilder: 

public static String spacesBeGone(Char placeHolder, String stringToCompact)
{
    List<Char> compactedStringProxy = new List<Char>();
    Boolean compressingSpaces = true;
    foreach (Char thisChar in stringToCompact)
    {
        switch (thisChar)
        {
            case ' ':  if (!compressingSpaces)
                       {
                           compressingSpaces = true;
                           compactedStringProxy.Add(placeHolder);
                       }
                       break;
            default:  compressingSpaces = false;
                      compactedStringProxy.Add(thisChar);
                      break;
        }
    }
    StringBuilder compactedString = new StringBuilder();
    foreach (Char proxyChar in compactedStringProxy)
    {
        compactedString.Append(proxyChar);
    }
    return compactedString.ToString();
}

test

void Main()
{
    Console.WriteLine (spacesBeGone('%',  "Mr           John            Smith"));
    Console.WriteLine (spacesBeGone('%',  "Mr John Smith"));
    Console.WriteLine (spacesBeGone('¿', @"Hi, I am trying to convert space in a string into other characters. For example: input: ""Mr John Smith"" ouput ""Mr%John%Smith"". We need StringBuilder ? Please advise."));
}

test output

Mr%John%Smith
Mr%John%Smith
Hi,¿I¿am¿trying¿to¿convert¿space¿in¿a¿string¿into¿other¿characters.¿For¿example:¿input:¿"Mr¿John¿Smith"¿ouput¿"Mr%John%Smith".¿We¿need¿StringBuilder¿?¿Please¿advise.

g.