Encryption refers to the process of transforming data using a special algorithm and making it readable only for the users knowing the key / password needed to decrypt the information.
Encryption programs use a very wide variety of algorithms in order to encrypt files: Rijndael, Serpent, Twofish or RC6.
One of the disadvantages of file encryption (also known as filesystem-level encryption) is the lack of metadata.
In other words, timestamps or directory structure can be sometimes lost if the encryption algorithm is not chosen properly.