How Encrypt module actually works?
The Encrypt module:


  provides an application programming interface (API) for performing two-way data encryption. It allows modules to encrypt data such that it can be decrypted using the same key that was used to encrypt the data. This is useful for storing sensitive information.


Emphasis mine. That's its purpose, to provide an API that other modules can use to encrypt data before it's stored in the database (or elsewhere I guess). 

As an API module, it provides no functionality unless you make explicit use of it; either by installing one of the modules listed that uses it, or by writing a custom module that does so. The emphasis is on you (or the writer of a contrib module) to actually do something useful with this module:


  It is up to the module calling encrypt() to manage and store the encrypted data.


The important thing to understand is that it doesn't (and couldn't) protect users from having their data sniffed over a public network. For that you'll need to use HTTPS, no exceptions. All this module does is offer an encryption/decryption service for your server-side app.