The correct answer is 'Data in use'. Data in use refers to information that is currently being processed by an application, being in the immediate memory or CPU, and it is not at rest or in the process of being transmitted. 'Data at rest' describes data that is stored on a physical medium and is not actively being accessed or processed. 'Data in transit' refers to data that is moving through the network or telecommunication channels. 'Encrypted data' is a state that can apply to any of the three data states (at rest, in use, or in transit) and merely specifies that the data is encrypted, not that it is being processed by an application.