Lemmy doesn’t encrypt private messages. While there isn’t an option inside of Lemmy for admins to view your private messages, someone with access to the database (e.g. me) could technically run a database query to view them, hence that warning.

This is true for almost every other service you use, such as e-mail for example. Private messages are just text saved in someone’s server database. I have no desire to view anyone’s private messages, but you should keep in mind that I can.