Everything that gets synced -- bookmarks, preferences, etc. -- or just passwords? Do you have a source for that? I can only find evidence that passwords are encrypted client-side.
http://www.google.com/support/chrome/bin/answer.py?hl=en&...
That does seem to imply that only passwords are encrypted while in storage. That's not surprising, since Chrome has a "master password" for password encryption, but unlike Firefox it does not require transferring an encryption key for your other sync data. (The client-side encryption key is the reason you need to "pair" your devices to set up Firefox Sync, instead of just entering a username and password.)