I read man vim, :h -x and :h encryption none of this actually says what algorithm it's encrypted with.
What encryption does vim -x use?
security;vim;encryption
:h 'cryptmethod' says that PkZip and Blowfish (new in Vim 7.3) are possible encryption methods.  A look around FEAT_CRYPT in vim/src/misc2.c confirms it.The weak encryption method is documented in PKWARE's zip file format documentation, and the new strong encryption is documented on Bruce Schneier's Blowfish page.