[mod_python] Unicode Question

I know this issue has been brought up many times and I have tried to
search and read as much as possible but still have not been able to
resolve my issue. I have a mysql database (not the latest but it
supports unicode). I am keeping some columns in utf8 format and only
save data that is in utf8. However, when I read the data back (I am
using mod_python and mysqldb module) I see characters like the following
on my web page:
 
%u0631
 
Now if I replace "%u" with "&#x" in my python code b/f sending them to
browser, everything displays fine!
 
Am I doing something wrong in mysql side, or, is this the job of the
python to do the conversion. 
 
I appreciate any help. 
 
-Jalil