Bypassing encryption possible?

[jez_inc]

When I check settings on MIUI it says the phone is encrypted. However if I:

1. Power off the phone completely
2. Boot into TWRP recovery (3.4.2b)
3. Click cancel on the encryption password screen without entering anything

I can browse all my files, even plug it into my computer and transfer files from it.

How is my phone encrypted if this is possible?

Phone model is lmi