Does pages encrypt password-protected documents?

I would like to protect a document against reading its contents by others. Therefore I would like to know whether Pages encrypts a document when you set a password on it. I tried to look at the contents of a .pages file, but even when it is not encrypted I could not find back the text in clear form. So is the document always encrypted anyway? If encryption is used, how strong is it?
Observation: an encrypted document of 65k shrinks to 24k when you set a password on it. When you then remove the password it is 49k. Very puzzling...

Thanks for taking the time to write again, Peter. I don't think I will take it to Apple Care, it would probably take a lot of time and trouble to get an answer, if at all. Instead, I will just assume that, if there had been encryption, that would have been a feature worth mentioning in the user documentation. And since the user manual and help pages do not mention it at all, just password protection, the most likely answer is that there is no encryption.
I will assume that you are right with your suggested proprietary file layout, possibly in combination with compression. For serious business, I will encrypt the file using a separate tool.
BFN,
Jan

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