How do Blockchain.info recovery mnemonics encrypt wallet data and what prevents hacking of the algorithm?
Edit:
Blockchain.info is open source, the algorithm is public. The mnemonic that they use stores information about your wallet id and your password only. 

Previous answer: You should read into BIP 39 this covers how mnemonics map to the values that are used to create a HD wallet the algorithm is very well known and corresponds to the size of the key space needed for wallet generation.  There are generally 2048 words in the wordlist used to create a wallet. A 12 word seed generates 128 bits of information (and 4 check bits). That's 11 bits per word from a list of 2048 words.