Encryption is a constant debate in many forums about which standard to use, why you should use a specific standard, whether it's compatible with devices or why one type runs quicker than others. It is no joke: Encryption can determine how well your Wireless network operates.
Today, you have the choice between many encryption options as a home user. No encryption, WEP 64-bit Encryption, WEP 128-bit Encrption, WPA TKIP, WPA AES, WPA2 TKIP, and WPA2 AES encryption. In an enterprise or enthusiast, or otherwise "paranoid" environment you can have the above along with further encryption known as RADIUS and ciphers. Each level of encryption has been introduced with each coming Wireless standard. No encryption, WEP, and WPA were introduced during the days of Wireless B, with WEP being common due to wide support. WPA2 was introduced during the days of Wireless A and G being introduced, and WEP remained king but WPA grew out of the use of Wireless Protected setup (a massive security hole and now widely exploited).
The strongest level of encryption to use today as a home user is WPA2 AES encryption, and this is currently deemed uncrackable except by brute force, which requires super computing power of essentially quantum computer levels or a mass farm of GPUs running a cracking program just to break a strong key. WPA hsa known exploits as mentioned above, and WEP can be cracked in seconds due to how weak it is.
Now, what does the encryption have to do with speed? First of all, this is a matter of what the encryption entails and how it is done. WEP and WPA encryption for example are CPU heavy. In a high performance situation, WEP security will outpace WPA security due to how much more compex WPA is as an encryption standard set, however at a big cost of security. WPA will be more secure for less performance, but you will also have less compatibility with it amongst B Devices (G devices should have no problem, they're required to all support it). On low end or very old access points, WPA and WEP encryption in a high bandwidth environment can cause your Wireless speed to be slowed, especially as the number of devices increase due to processor load, and this can eventually lead to crashing from heat or excessive CPU usage on such device.
WPA2, which was introduced during the Wireless G days is a much more complex form of encryption utilizing AES encryption, and this is compared to TKIP which is what WPA uses. However, WPA2 tends to operate much faster despite being more complex Why is this? In modern chipsets, WPA2 encryption and decryption doesn't so much rely on the processor of your router or access point, but is instead performed on the same chip running your Wireless radio, so essentially it's a process that is done by dedicated hardware. This means to you, very fast, and very strong encryption. In older chips that had WPA2 support added to them by software, as seen in the ActionTec MI424WR Rev. A Verizon handed out in the early days of FiOS, WPA2 encryption was performed in software rather than in dedicated hardware and as a result, your access point or router (or a very slow computer) often ground to a halt trying to encrypt and decrypy wireless traffic on the processor of the router.
Let's add in another deal here: Wireless N and Wireless AC. By definition of the standard, Wireless N will not operate any Wireless N capabilities, such as improved speeds or Spatial streams unless the encryption is set to WPA2 mode. Meaning, if you have any device that connects to the network using WPA or WEP encryption, you are basically rendering Wireless N useless and turning your network back into a Wireless G network, or maybe a B network, so you will instead of connecting at 300Mbps as an example, be forced to connect at no more than 54Mbps. Even more broad, this means your Wireless will run slower. Draft Wireless N gear may not obey this, but keep this in mind. Wireless N requires WPA2 AES security and cannot use any other encryption. Wireless N however, will function absolutelyt fine with no encryption if you wish to run like that, which I don't recommend 🙂
Some side notes: If you own an ActionTec MI424WR Rev. F, G, or I from Verizon, absolutely set the router to only use WPA2 AES mode only. Otherwise you're throwing away some good capabilities you were given. It saves everyone time and headaches trying to figure out why the Wi-Fi is running slower when it's as simple as the encryption. If you have any other router from Verizon besides a D-Link DI-524 or older, or an ActionTec MI424WR Rev. A, both of which should be retired due to age ideally, set up WPA2 anyways as it's a gift 🙂