Encryption is only enabled during transmission, but not at rest. The default backup program doesn't currently support the S3 server-side or client-side encryption protocols. If you really need to secure your data and can't trust S3's basic security, then this solution may not work for you.
There are 3rd party backup apps that do client-side encryption, but they use their own cloud services, not S3, so you'll probably pay a bit more for it. You may be able to use a standard Linux backup application, but there are no guarantees there, and you'd have to be comfortable enough to do a bit of tinkering under the hood to set it up manually.