🚀 go-pugleaf

As an AWACS Airborne Radar Systems Technician (ART) I can offer you some
clues.  It's actually called IFF/SIF for Identification, Friend or Foe slash
Selective Identification Feature.  The SIF is what's common to Civilian
Mode 3/A (Squawk) and Mode C (Altitude).  The Military uses Mode 1 and Mode 2
of the SIF system also.  The IFF system is called Mode 4 and is indeed 
encrypted.  Beyond that only the NSA knows for sure how it works...
The current state of the art is the Mark 12 system.  On the list of new
stuff is the Mark 15 set.  Mark 12 and Mark 15 will both have Omni-directional
antenna's on the replying aircraft.  So the idea of not being detected
replying is not very valid.  There are two current systems with the British
way ahead in this stuff.  The first system drinks up the replies as the antenna
scans in azimuth and then after finding the start and end determines the
azimuth must be the half of that.  The newer systems use monopulse techniques
and accurately determine azimuth.  The difference is either a wobbling data
trail, or a perfect line of data.  All this is based on an Interogator that
transmits 3 pulses, and a Transponder which sends back about 12 info pulses.
Mark 15 and Mode S will have some new stuff with much more data.  Also instead
of the Transponders spewing out replies, they'll only reply once.  This is
needed with the new TCAS collision avoidance stuff, as all the airliners will
soon be interrogating the path ahead of them.  You can hear this activity on
1090 MHz (Aircraft) and 1030 MHz (FAA Ground Site).  Hope this helps a little.