While Jobs’ Mob's Apple encrypts your iOS device's locally stored data, it doesn't fully encrypt iCloud backups.
Reuters claims Apple dropped plans for end-to-end encryption of iCloud backups (codenamed KeyDrop and Plesio) roughly two years ago. The decision came soon after the company revealed those plans to the FBI, which unsurprisingly objected given its previous pressure on Apple to facilitate access to San Bernardino shooter Syed Farook's iPhone.
But it looks like the FBI were not the main reason for the planned change. A former Apple worker said the company might have ditched the plan over concerns customers could be locked out of their data more often.
Apple said that particularly sensitive data like iCloud Keychain, networking passwords, health data, payment info and Siri info are end-to-end encrypted on iCloud. Much of your info also has encryption both on the server and in transit, too. But it is technically possible for Apple staff and law enforcement to get more lightly protected data.
This appears to be some sort of compromise, but it does not appear to have worked. The Spooks still want full access.