I need to launch Boxcryptor and enter the pin before launching Obsidian. Otherwise, Obsidian can’t find the vault at all. You can set up Boxcryptor to launch at start if you like.
Boxcryptor changes all file extensions to a different one (.ch?) while they are are encrypted. If you force them to open with Notepad you’ll just see encrypted gibberish. Once you enter the PIN in Boxcryptor they’ll open as proper .md files.
Edit: given the base functionality (as I use it) is free, I suggest downloading it and trying it out with a test vault, which is what I did at first.