Encryption involves encoding data such that it can’t be read by other people. It’s important to use encryption when dealing with sensitive data (e.g. financial information), where someone else might get access to it. If you are storing or backing up data to an external disk at home, you need to consider the risk that this disk might get stolen, and if you are using a cloud service you need to consider the risk of unauthorized access to that service.
When you store data in encrypted form, you will need to provide an encryption key when you first encrypt the data. You can think of the encryption key as a long password. Once encrypted, whenever you need to access this data, you will need to provide the encryption key again. You need to be careful never to lose the encryption key as you will not be able to recover your data without it. Often, cloud services encrypt data without user intervention. This is where they manage the encryption key and do the encryption and decryption of data automatically. Which method you choose will depend on how sensitive the data is and how much you value the convenience of not having to manage your own encryption keys.
If storing personal data on a cloud service, it is also important to ensure the data is encrypted while it is being transferred from your computer to cloud storage. This is typically handled seamlessly without any user interaction. Before signup, you should confirm with your cloud service provider that your data will be encrypted during transfer.