The documents I know of that provide details about it are here:
* https://matrix.org/jira/browse/SPEC-162 (the tracking issue for the feature in Matrix's issue tracker)
* https://matrix.org/git/olm (C implementation of the protocol formerly known as axolotl v2 developed for use in Matrix)
* https://matrix.org/speculator/spec/drafts%2Fe2e/client_serve... (draft of the spec for E2E)
Matrix is lacking its E2E encryption but already has everything else. You can use Vector today to replace Hangouts or Skype completely.
There's no concept of finding "peers" in Matrix. It's more akin to xmpp : each user is attached to a Homeserver, which can chose to federate to one or multiple other HSes. Users may then create rooms on their own HS (or the HS they federate to) and other users may join those rooms, similar to IRC.
[0] http://matrix.org/speculator/spec/drafts%2Fe2e/client_server...