Does this replace the backups on the server?

No, they answer different problems. See how long are backups kept for what to rely on and what not to.

Which plugin should I use?

That is your choice; we do not endorse one. Judge it on your destination, whether it can split large jobs, whether it restores as well as it backs up, and where it keeps your credentials.

Should backups be encrypted?

If they hold customer data, yes, and keep the key somewhere other than the backup destination. An untested encrypted backup is two problems, so test the restore.