Its stdin will be the file instead of a pipe, but few programs care about the difference and fewer still in such a way that you'd prefer to use the pipe.
It doesn't appear so, no. The raw bytes seem to be dumped to temp files, local storage, or S3 [1][2] without mention of any sort of encryption step (or reading of a secret somewhere). As mentioned below, you could encrypt before uploading of course. Someone please correct me if I misread though.