If I used regular encryption to send my credit card information to an AI with fraud detection, the provider still needs to decrypt that data on their side at some point before it goes into the AI.
Using this other encryption, the provider has neither need nor capability to decrypt it on their end, so the user gets extra security.
this is not entirely true, I think. secure enclaves can provide guarantee such that even the host machine cannot inspect the contents within the VM. so even though the AI model itself needs to see plaintext, all is happening in the enclave which the provider cannot see.
the main difference is where the guarantee comes from. for FHE, it comes from math, which we trust. for secure enclave, the guarantee comes from Intel/AMD's promise that their hardware is bugless/backdoorless, and that your adversary cannot directly inspect bits in the hardware