Yes it works, but remember that anyone else on the same phase in your area can also see what you're sending.
This appears to be an urban myth, debunked recently in a test by Personal Computer World.
It seems that no data can pass beyond the Consumer Unit (fuse box). The only situation that this might be a problem is within a shared office or domestic situation where there is only one CU serving more than one group of people. In the latter situation, then encryption would indeed be appropriate.
There is no harm in encrypting your data anyway, but it would appear to be an unnecessary overhead.
SD