Yeah, that supports handling encrypted files, but the question is if org indexes such files to handle interlinking, file completion, agendas and stuff.
It depends on how you do it. Org maintains a reference to what id's you use in links, so if you have an encrypted file with an id link, those links are active and you'll be taken to the right file when following the link (and asked to decrypt it etc.)
for example:
encryptedfile.org.gpg
* someheading
:PROPERTIES:
:ID: bf15277c-8505-4888-9497-a5533829217d
:END:
EOF
otherfile.org
[[id:bf15277c-8505-4888-9497-a5533829217d][this link will work]]
EOF
I'm not sure about agenda and file completion though.
for example:
encryptedfile.org.gpg
* someheading
:PROPERTIES:
:ID: bf15277c-8505-4888-9497-a5533829217d
:END:
EOF
otherfile.org
[[id:bf15277c-8505-4888-9497-a5533829217d][this link will work]]
EOF
I'm not sure about agenda and file completion though.