When you choose an encryption key for your file and database backups, the resulting backup will be encrypted via AES-256 and can only be decrypted using the same key you used.
Behind the scenes, openssl is used take care of the encryption for you. This works best when backups are also streamed ("Backup Streaming" is enabled) since it will happen on the fly and the backup output will not even exist unencrypted at any point in time during backup states transition.