What Is Encryption? A Plain-English Guide for Business Leaders

Posted: December 31, 1969 to Cybersecurity.

What Is Encryption? A Plain-English Guide for Business Leaders

Encryption is one of those terms that everyone in business has heard, most people have a vague sense of, and very few can explain with confidence. That gap between awareness and understanding is a problem, because encryption is not just a technical detail your IT team handles. It is a foundational business decision that affects your security posture, your compliance obligations, your liability exposure, and your ability to protect customers, employees, and intellectual property.

This guide explains encryption in plain language. No computer science degree required. If you are a business leader, executive, or decision-maker who needs to understand what encryption does, why it matters, and how to ensure your organization is using it correctly, this is for you.

How Encryption Works: The Core Concept

At its simplest, encryption is the process of converting readable data (called plaintext) into an unreadable format (called ciphertext) using a mathematical algorithm and a key. Only someone who has the correct key can convert the ciphertext back into readable data. Without the key, the encrypted data is essentially meaningless, even if an attacker gains access to it.

Think of it like a lockbox. You put a document inside, lock it with a key, and send the lockbox to someone. Even if a thief intercepts the lockbox, they cannot read the document without the key. Encryption does the same thing with digital data.

Symmetric Encryption

Symmetric encryption uses a single key for both encrypting and decrypting data. The sender encrypts the data with the key, and the receiver decrypts it with the same key. The challenge is obvious: both parties need to have the key, and if the key is intercepted during transmission, the encryption is compromised.

The most widely used symmetric encryption algorithm is AES-256 (Advanced Encryption Standard with a 256-bit key). AES-256 is the standard adopted by the U.S. government for protecting classified information. It is considered computationally infeasible to break with current technology, including quantum computing for the foreseeable future. When you hear that something uses "military-grade encryption," it almost always means AES-256.

Asymmetric Encryption

Asymmetric encryption, also called public-key cryptography, solves the key-sharing problem by using two mathematically related keys: a public key and a private key. Anyone can encrypt data using the public key, but only the holder of the corresponding private key can decrypt it.

Asymmetric encryption is the foundation of secure internet communication. When you visit a website with HTTPS, your browser uses the website's public key to establish an encrypted connection. RSA and Elliptic Curve Cryptography (ECC) are the most common asymmetric algorithms.

In practice, most systems use a combination: asymmetric encryption to securely exchange a symmetric key, and then symmetric encryption for the actual data transfer, because symmetric encryption is much faster for large volumes of data.

TLS: Encryption in Action on the Internet

Transport Layer Security (TLS) is the protocol that encrypts data as it travels across the internet. Every time you see the padlock icon in your browser's address bar, TLS is at work. TLS protects email transmission, web browsing, file transfers, VPN connections, and API communications.

TLS replaced the older SSL (Secure Sockets Layer) protocol, though people still commonly say "SSL" when they mean TLS. Current best practice requires TLS 1.2 or TLS 1.3. Older versions have known vulnerabilities and should be disabled.

For businesses, ensuring TLS is properly configured across all systems, including web servers, email servers, and application APIs, is a baseline security requirement, not an optional enhancement.

The Three States of Encryption

Data exists in three states, and each state requires its own encryption strategy:

Encryption at Rest

Data at rest is data stored on a device or medium: hard drives, databases, backup tapes, USB drives, cloud storage. Encrypting data at rest protects it if the storage medium is stolen, lost, or accessed by an unauthorized person. Even if someone physically removes a hard drive from your server, encrypted data at rest remains unreadable without the decryption key.

Encryption in Transit

Data in transit is data moving between systems: across the internet, between a client and server, between offices, or between a device and a cloud service. TLS, VPN tunnels, and encrypted email protocols protect data in transit. Without encryption in transit, data can be intercepted and read by anyone with access to the network path.

Encryption in Use

Data in use is data actively being processed by a CPU or application. This is the most challenging state to protect because data typically needs to be decrypted for processing. Emerging technologies like confidential computing, homomorphic encryption, and secure enclaves are working to solve this problem, but practical solutions for encryption in use remain limited compared to at-rest and in-transit encryption.

Full Disk Encryption

Full disk encryption (FDE) encrypts the entire contents of a storage device, including the operating system, applications, and all files. When the device is powered off or locked, the data is encrypted and inaccessible without the authentication credentials.

BitLocker (Windows) and FileVault (macOS) are the most common FDE solutions. For servers and enterprise environments, solutions like LUKS (Linux Unified Key Setup) provide full disk encryption with flexible key management. At PTG, our own infrastructure uses LUKS2 with AES-256-XTS encryption to protect sensitive data at rest, the same standard we recommend and implement for our clients.

Every laptop, every removable drive, and every server containing sensitive data should have full disk encryption enabled. This is non-negotiable in any modern security program.

Email Encryption

Standard email is sent in plaintext and can be read by anyone who intercepts it. Email encryption ensures that only the intended recipient can read the message content. There are two primary approaches:

Transport-level encryption (TLS) encrypts the connection between email servers, protecting messages in transit. Most major email providers now support TLS, but it depends on both the sending and receiving servers having TLS enabled.

End-to-end encryption (E2EE) encrypts the message content itself, so that only the sender and recipient can read it, regardless of what servers it passes through. S/MIME and PGP are the traditional E2EE standards, though more modern solutions offer simpler user experiences.

For organizations handling protected health information under HIPAA or controlled unclassified information under CMMC, email encryption is not optional. It is a regulatory requirement.

Database Encryption

Databases contain an organization's most valuable and sensitive information: customer records, financial data, health information, intellectual property. Database encryption can operate at several levels:

Transparent Data Encryption (TDE) encrypts the database files on disk without requiring changes to applications. It protects against physical theft of the storage media but does not protect data from authorized users who query the database.

Column-level encryption encrypts specific columns that contain sensitive data, such as Social Security numbers or credit card numbers, while leaving less sensitive columns unencrypted. This provides granular protection with less performance impact than full database encryption.

Application-level encryption encrypts data before it enters the database, ensuring that even database administrators cannot read sensitive values. This provides the strongest protection but requires application changes.

Key Management: The Most Important Part

Encryption is only as strong as the management of its keys. If encryption keys are stored alongside the data they protect, compromised along with the data, or managed without proper access controls, the encryption provides little real protection.

Effective key management includes:

Separation of keys and data. Encryption keys should never be stored on the same system as the data they encrypt. Dedicated hardware security modules (HSMs) or key management services (KMS) provide secure key storage.

Key rotation. Encryption keys should be rotated on a regular schedule. If a key is compromised, regular rotation limits the amount of data exposed.

Access control. Access to encryption keys should follow the principle of least privilege. Not every IT administrator needs access to every key.

Key backup and recovery. Losing an encryption key means losing access to the encrypted data permanently. Key backup procedures must be secure, tested, and documented.

As Craig Petronella, CEO of PTG and author of 15 books on cybersecurity, has noted: "Organizations spend significant resources implementing encryption and then undermine it all by mismanaging their keys. Key management is where encryption programs succeed or fail." PTG's ComplianceArmor platform includes key management documentation and policy frameworks that help organizations implement and evidence proper key management practices.

Compliance Requirements for Encryption

Encryption is not just a best practice. It is a regulatory requirement across multiple frameworks:

HIPAA identifies encryption as an addressable implementation specification for protecting electronic protected health information (ePHI). While technically "addressable" rather than "required," the reality is that any organization choosing not to encrypt ePHI must document why an equivalent alternative measure provides equal protection, a justification that is extraordinarily difficult to make.

CMMC requires encryption at multiple levels. CMMC Level 2 mandates FIPS-validated encryption for CUI at rest and in transit. This is not optional or addressable. It is a hard requirement that defense contractors must meet to maintain their contracts.

PCI DSS requires encryption of cardholder data in transit across open networks and recommends encryption at rest. Specific requirements dictate minimum key lengths and approved algorithms.

SOC 2 includes encryption controls within its Trust Services Criteria, particularly under the Security and Confidentiality categories.

Common Encryption Mistakes

Even organizations that implement encryption frequently make mistakes that undermine its effectiveness:

Using outdated algorithms. DES, 3DES, RC4, and MD5 are all considered broken or weak. Organizations still using these algorithms have encryption in name only.

Not encrypting backups. If your production data is encrypted but your backups are not, an attacker who accesses your backup storage has all your data in plaintext.

Forgetting about data in transit internally. Many organizations encrypt data traveling over the internet but leave internal network traffic unencrypted. Attackers who gain access to the internal network can intercept this traffic.

Ignoring key management. Storing encryption keys in application code, configuration files, or the same database as the encrypted data defeats the purpose of encryption.

Assuming encryption alone is sufficient. Encryption is one layer of a defense-in-depth strategy. It does not replace access controls, monitoring, patching, or employee training.

Encryption and AI: The Emerging Intersection

As organizations adopt artificial intelligence and machine learning, encryption becomes more complex. AI systems need access to large datasets for training and inference, and encrypted data cannot be directly processed. This creates tension between the need for encryption and the need for AI utility. PTG builds custom AI hardware solutions that address this intersection, helping organizations leverage AI capabilities while maintaining encryption standards and compliance obligations.

Taking Action

If you are unsure whether your organization's encryption program is comprehensive and properly implemented, you are not alone. Encryption is a multifaceted discipline that spans endpoints, servers, databases, email, cloud services, backups, and key management. Getting it right requires expertise and ongoing attention.

Contact PTG for an encryption assessment. With more than 23 years of experience in cybersecurity and compliance, including deep expertise in HIPAA, CMMC, and NIST frameworks, we will evaluate your current encryption posture, identify gaps, and implement solutions that protect your data and satisfy your compliance requirements.