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Question: how and where message is stored when my phone is off and somebody will send me a message? How it is encrypted and then decrypted on my device once turned on?

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It will either be on the remote device, or os Signal's servers, depending on how the implementation works. Either way doesn't really matter; the whole point of encryption like this is to prevent third-party access to your communications.

It could be stored at NSA central for all it matters, and you'd still be the only one able to read the message (using the keys on your device).

I know how encryption works. My question was rather design wise. I.e. Which keys are used to encrypt messages on WhisperSystems servers (my public key? Or sender's?). But I'll have a look on the link below describing modified OTR protocol.

They are using a modified OTR protocol: https://whispersystems.org/blog/asynchronous-security/

Thank you easyd. That was a good read :)

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