Yes! Data is encrypted prior to being sent over the wire. This means that compression on the tape drive will be rendered useless.
I understand the *want* of having data encrypted prior to sending over the LAN, but at the same token, with today's switched networks, VLAN's, and L3 routing w/ ACL's, it may not be necessary.. Prior to LTO4 being so wildly popular, it was the only choice. Now, networking technology has some a long way since client-side encryption was introduced, and tape technology is cheaper/faster/easier to use.
I guess if you *Had* to do it, I would limit to the specific hosts that need it. Just keep in mind your backup throughput could drop upwards of 50% due to encryption overhead.