Is server-side encryption working? (How does it work)

I have a question about the way server-side encryption works.
At the admin Panel I enabled server-side encryption. Also I enabled the App Default encryption module (1.1.0). The keys has been created and everything seems to work from the admin panel side.

But if I connect to my server, move to the owncloud directory I still can see and read all files. I also tried to create a my file by using the web interface or uploading a new file after enabling server-side encryption. But I can see the content without using any key.

What does sever-side encryption do if I can easily can read and edit all files? Does my server works the way it should ?
Is it possible that my old php version caused this issue, if it is one ?

ownCloud 8.2.7 (stable)
Debian 7
PHP version (5.4.45-0+deb7u4)

Not directly an answer but it makes no sense to use the encryption app if you don't use external storages:

Encryption keys are stored only on the ownCloud server, eliminating exposure of your data to third-party storage providers. The encryption app does not protect your data if your ownCloud server is compromised, and it does not prevent ownCloud administrators from reading user’s files. This would require client-side encryption, which this app does not provide. If your ownCloud server is not connected to any external storage services then it is better to use other encryption tools, such as file-level or whole-disk encryption

At this link you will also find the documentation how the app is working.