So I have been receiving a file in local and encrypting it via a MFT Scheduled event and sending it to destination via SFTP. I used Virtual Folder for both Source and Destination. I have seen a Encryption property in Virtual folder. Can somebody tell what is does? Is the encryption different from Event Management Encryption? Which is the better ?
The encryption configuration on VFS is for keeping files in encrypted form in file system so that files uploaded by users stay in encrypted form and no one can access the file. This file when downloaded gets decrypted using the key configured and downloaded in unencrypted form. Both encryption/decryption in this case happens on stream being written or read. You have encryption configuration at user and server preference level as well. The behavior here are same as VFS encryption configuration.
For your use case, encrypting the file using encryption task in event is the right choice.