The difference between encrypted and unencrypted vlan attachment is explained in [1] and I quote here: “You can create unencrypted VLAN attachments or encrypted VLAN attachments. Encrypted VLAN attachments are used in HA VPN over Cloud Interconnect deployments. You can create unencrypted VLAN attachments that are single stack (IPv4 only) or dual-stack (IPv4 and IPv6). However, encrypted VLAN attachments are always configured to be IPv4 only.”.
Hence If you want to encrypt the traffic that traverses your Dedicated Interconnect or Partner Interconnect connections, then you should use “HA VPN over Cloud Interconnect” and use the encrypted option for vlan attachments. Please check [2] under references.