Where is encryption explained in LO documentation? I thought LO utilized 256-bit encryption, but would like to learn more about invoking it and how secure it is.
Yes, LO uses a 256-bit key, a strong algorithm and a quite elaborate implementation procedure.
There is no widely available public documentation describing it. If you want to have a flavour of it, read my analysis to this question where user wanted to recover his file without the password.
LibreOffice uses the International Open Document Standards, .odt for documents. It specifies the Algorithm to use. For more information you should could try OASIS documentation, for example https://www.oasis-open.org/standards#opendocumentv1.2