Layer 2 is the data-link layer specified by the Open Systems Interconnection (OSI) model, which standardizes the functions of telecommunications and computing systems around the world.1 Layer 2 encryption secures information at the data-link level as it is transmitted between two points within a network2.
Layer 2 encryption protects data in transit, so it is useful when the transmission line is not secure. But, because the message is decrypted at each host in the transmission path, Layer 2 encryption is best suited for systems in which every transmission host is secure.3
1https://www.wideband.net.au/blog/difference-layer-3-layer-2-networks/
2http://searchsecurity.techtarget.com/definition/link-encryption
3Ibid