AFAIK, wiping means deleting files and folders (on Data partition) while formatting means re-establishing the file system (on Data partition).
In the first case the old file system remains, meaning that also the old encryption, set-up by the previous ROM remains, while in the second case, the new ROM sets its new encryption from scratch
That's the big difference compared to the ancient Android versions where Data partition and internal memory were not encrypted, hence it was enough to wipe (just to delete files and folders, with no need for formatting)
That's the reason why nowadays, when swithching the ROM, one must FORMAT Data, not just wipe it - and it applies generally for switching the ROMs, not only for switching to Xiaomi.eu
You can find number of users on forums and channels, reporting a bootloop and crying for help, swearing they did everything 'correctly' when they (just) wiped Data while switching the ROM (and once they finally get convinced they need to Format Data, then they confirm successful booting)