The new Azure Disk Encryption feature was introduced into Public Preview last November. It allows for Virtual Machines (VMs) hosted within Azure to be encrypted using keys and policies controlled by Azure Key Vault.
Here’s video session from AzureCon 2015 on Encryption and key management with Azure Key Vault:
The Azure Disk Encryption works for both Windows and Linux VMs, and utilizes Azure Key Vault to allow you to safeguard, manage and audit encryption key usage. All data within the VM disks is encrypted at rest using industry standard encryption within Azure Storage.
The Linus disk encryption is based on dm-crypt, while the Windows disk encryption is based on Microsoft BitLocker Drive Encryption.
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