This page makes it unclear:
https://support.apple.com/en-us/HT202303
It notes "Encryption is available only when you use the latest iOS or macOS and upgrade your Notes app." – and the latest version of Notes app has a "password protect" option.
What I'm trying to figure out is in the latest version of Notes app, are all notes encrypted on Apple's servers, or just ones that are explicitly password protected?
Best Answer
Yes. All iCloud data is protected at rest minimally by encryption as described in the security white paper Apple publishes regularly.
https://www.apple.com/business/docs/iOS_Security_Guide.pdf - Page 44
iCloud Drive and CloudKit data have additional layer(s) of encryption / keys added, but for notes you get the described level of security where data is encrypted before it leaves the device and hits the network.
The local password feature is solely to prevent access of the note on your device(s) once the note is retrieved from the cloud.