The app encrypts the files stored in its vaults using the AES algorithm. The length of the encryption chain can be 128 bits or 256 bits.
Each vault can hold anything from one program file to an entire volume of your hard drive. The vaults behave in the same way as disk images and they mount and unmount in the same way, too.
You can also use Knox to make periodic backup copies and store them inside one of your vaults. Another interesting feature allows you to integrate the content of the vaults into the SpotLight search function. (That feature is only available if you register the program.)