what does it mean when imessage says encrypted?

one caveat: if you back up your phone to iCloud and don't have Advanced Data Protection on, the backup holds a copy of the key. so the messages are protected in transit, but Apple could get into the backup. turning on ADP closes that.

It means the message is end-to-end encrypted, so only the devices in that conversation can read it. Apple can't, your carrier can't. That's every blue bubble chat. Plain green-bubble SMS doesn't get that protection.