FIPS 140-2 and AES 256-bit encryption are typically applied to ensure the security of federal clients' data in three key areas: data in use, data at rest, and data in transit. 'Data in use' refers to data that is actively being processed. 'Data at rest' refers to inactive data that is stored in any digital form. 'Data in transit' refers to data that is actively moving from one location to another, such as across the internet or through a private network.