iFolder uses Blowfish to encrypt the data on the wire. The data is then encrypted and stored on the enterprise server. This is same as in iFolder 2.x, which provides passphrase-based encryption. To enable encryption for the users, set the encryption policy to On under the System policy in the Web Admin console.
For more information, see Configuring System Policies
in the Novell iFolder 3.9.2 Administration Guide.