Midi converter uses high quality GM (general midi) sounds to convert midi files but it also allows you to choose an external sound font file and convert midi files using its sounds.
SoundFonts, carrying the extension sf2 , are files that house a collection of sounds (wav files) that are grouped together to form instruments. These are then loaded into your sound card, or software that reads and plays sf2 format, which can then be triggered by midi controllers (midi files,keyboards etc.).
You can create SoundFonts by using any SoundFont editor, like Vienna SoundFont Studio. SoundFonts are a great way of creating large fonts of instruments. The fact that you are only limited by the ram in your computer makes this a very appealing format.