Definition
Encryption uses a key and an algorithm such as AES to transform readable data, called plaintext, into ciphertext. Decryption reverses that with the same key, or with the matching private key when the scheme is public-key. The ciphertext can be stored or sent. It becomes the original data again only after decryption. A hash cannot be reversed this way. Encryption can.
Relevance
Encryption is how a save or a request stays unreadable without the key. For a file the game writes and later reads, the game itself holds the key. For traffic, the key is shared with the server, as with HTTPS, so the message is private on the way.
Example
A save system turns progress into JSON, encrypts those bytes with AES, and writes the ciphertext to disk. On the next launch the game reads the file, decrypts it with the same key, and parses the JSON. The file on disk is not the JSON.