What does PDF encryption mean for your PDF?
Encryption applies to the streams inside the file: text, images and attachments are stored as ciphertext, and the reader decrypts them once you supply the password. Without it, there is nothing readable in the file at all.
Modern PDFs use AES with a 256-bit key. Older ones use RC4 at 40 or 128 bits, which is considered broken — if you are protecting something new, AES-256 is the only sensible choice.
The cipher is rarely the weak point. A six-character password falls to a dictionary attack whatever protects it, and a password emailed alongside the file protects nothing at all.
How do you tell which encryption a PDF uses?
Open the document properties and look at the Security tab. It names the method in plain words: AES-256, AES-128, or 128-bit RC4 and 40-bit RC4 on older files. It also lists which permissions are allowed, which is a separate matter from the encryption itself.
The age of the file is a good guide. Anything produced by current software is AES-256; RC4 means the document came from software from the 2000s, or from a system that has not been updated since.
Re-encrypting an old file with AES-256 is worth doing if you are keeping it, and it costs nothing but a re-save. Encryption adds almost nothing to the file size — a few hundred bytes of dictionary, not a percentage.