Azure Database for PostgreSQL – Flexible Server uses storage encryption of data at-rest for data using service managed encryption keys in limited Azure regions. Data, including backups, are encrypted on disk and this encryption is always on and can't be disabled. The encryption uses FIPS 140-2 validated cryptographic module and an AES 256-bit cipher for the Azure storage encryption. Currently this feature is available in the Switzerland North, Switzerland West, Canada East, Canada Central, Southeast Asia, Asia East and Brazil South regions.
Infrastructure encryption with customer managed keys (CMK) adds a second layer of protection by encrypting service-managed keys with customer managed keys. It uses FIPS 140-2 validated cryptographic module, but with a different encryption algorithm. This provides an additional layer of protection for your data at rest. The key managed by the customer that is used to encrypt the service supplied key is stored in Azure Key Vault service, providing additional security, high availability, and disaster recovery features.
Source: General availability: Encryption using CMK for Azure Database for PostgreSQL – Flexible Server