You fingerprint is stored, and kept in a firewalled section of the A7 chip. It never is sent out, encrypted or otherwise. Apple doesn't have your fingerprint - the ONLY place the fingerprint exists, is in YOUR phone. This prevents unauthorized use, and with iOS 7 (coming to everyone on Wednesday) also makes your iPhone utterly worthless if stolen. Resetting the iPhone essentially "bricks" it; until it is "released" by the registered owner.
The fingerprint data is never available to other software, and it is not backed up to Apple's servers, leaving it stored entirely on the device in a secure fashion.
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