It is encrypted but only with a WEP key which I understand is not really that secure.
The question really is, "Secure compared to what?"
There are typically several encryption options available with even the least-capable wireless device, and any one of them provides much better security than no encryption at all.
Using a WEP key (indeed, the lowest level of encryption) does two things:
1) Most importantly, it keeps 99.999% of all "war driving" hackers out of your network. It's simply too big a pain to hack even a 10-digit key like WEP uses and there are undoubtedly completely unsecured networks nearby that are very easy targets ... no hacking required!
2) Secondarily, and a much less-sensitive issue due to the difficulty of putting it into practice, encrypting your wireless data makes it extremely difficult to interpret what that data is as it flows through the air.
As a guy who sets up wireless networks several times per month, I have yet to see a WEP-encrypted network get breached or monitored successfully. More than likely this will change as time goes on and more networks are secured, but for the foreseeable future, people being who they are, simple WEP encryption is just fine for any network that's not engaged in Cutthroat Commerce or National Security-type work where they are a truly tempting target for hackers.
And I would like to mention to anyone who is nervous about installing a secured wireless network that it is really very simple to set up using the "Quick Install" instructions that come with any wireless device. Click here, hit the next button, let the machine figure stuff out ... bingo. Your device is secured. Set up the computers that will connect to the device with a few clicks and a little typing and ... bingo. Your network is secure. Go about your business. It's really just that easy, and you won't have to mess with it, again.
Follow the 1-2-3-EZ-Setup. 'Nuff said.