S3 stands for Simple Storage Service. You can think of it like ftp storage, where you can move files to and from there, but not mount it like a filesystem. AWS automatically puts your snapshots there, as well as AMIs there. Encryption should be considered for sensitive data, as S3 is a proprietary technology developed by Amazon themselves, and as yet unproven vis-a-vis a security standpoint.
More references on AWS S3 here
More references on AWS S3 here
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