Encryption turns readable information into a coded form that is meaningless without the correct key. It is used in two main situations: while data is travelling, for example between a browser and a website, and while it is stored, for example on a disk or in a backup.
If a laptop is lost or a backup copy falls into the wrong hands, encrypted data is far harder for anyone to use. It is not a complete answer on its own, because strong passwords, sensible access rules and careful handling of keys all still matter. Encryption is a standard expectation for protecting personal and financial records.