Here is Apple support document on the subject:-
http://support.apple.com/kb/HT4865#
It looks like data is encrypted both while it is being transported and being stored. However there is a catch, Apple provide the ability to reset your iCloud password. To do that I think that they probably would have to have the ability to decrypt your data.
If this sort of thing worries you I think the only way to be certain is to take control of encrypting your data yourself before it leaves your device. A while ago Dropbox got some flak over this problem and people started putting together solutions for encrypting data beforehand (e.g. SecretSync and TrueCrypt) Given apps' limitations on file access anything similar on iOS is going to be rather clunky.
Finally I would be very surprised if apps had access to any data beyond their own.