Back in the '90s I did worked with semiconductors. Semiconductor manufacturing technology is quantified by half of the distance between two adjacent metal lines in a DRAM. If this distance is 100 nm, then the technology is known as "50 nm" technology, and the name of a manufacturing process gives you a rough idea of how small the features of chips made with that technology are. The first CMOS that I saw was made with a 7,000 nm process. By today's standards, that's huge. We'll be seeing processors made with 32 nm processes soon.
You can see things with a microscope that are bigger that about half of the wavelength of the light that you're using to look at them. Visible light ranges from roughly 400 nm to 700 nm in wavelength, so the smallest features that you can see with a microscope measure about 200 nm.
This means that the old 7,000 nm technology was easy to see under a microscope, but the newer technology is essentially invisible. If you try to use light with a wavelength of 400 nm to look at things that are only 32 nm in size, you essentially can't see them. The components are still there and still function like they used to. It's just harder to see them. If you can afford an electron microscope, for example, you can still see the features of modern devices, but these are more expensive than an optical microscope and typically can’t be used by the average person.
Encryption seems to have followed a path similar to semiconductor technology. It still works like it used to, but it's gradually disappearing from view. That doesn't mean that it's gone. It just means that it's harder to see it.
Back in the dot-com era, when you used encryption, it was often painfully obvious. It typically meant fighting with digital certificates, which doesn't really appeal to most people. Even the most dedicated and passionate fans of digital certificates had a hard time using them on wireless devices when they were used in WTLS, the version of SSL that was designed for these very devices.
Today, however, encryption has become much easier. If you can click on the "Send Secure" button instead of the "Send" button, you can now send encrypted email. Gateway encryption makes it even easier than that when it automatically encrypts outgoing email as needed with absolutely no additional action required by the sender at all.
The most common use of encryption is probably to authenticate users of a Windows system. When you log in to Windows on your desktop PC, there's actually a complicated cryptographic handshake that takes place that provides a way to use your Windows authentication to authenticate to other places on your network. The average user doesn't know that this is going on, of course, and probably doesn’t even care. To them, the technology is totally invisible even though it still works.
So encryption is definitely used more today than it ever was in the past, even though it's invisible to users in many cases. Maybe that's the natural evolution of all information technologies – once they become widely used, they also disappear from view. On the other hand, becoming invisible to users may be the very reason that some technologies become successful. The best case seems to be when users don't even know they're using the new technologies. Some encryption technologies have already reached this goal and others are very close. Encryption will almost certainly be around for the foreseeable future – you just may not be able to see it.