Yeah...
The thing is, all your personal information should already be encrypted when it leaves your device (before it reaches the VPN servers).
In my example, you would want to seal the envelop if it contains sensitive data (as opposed to using a post-card i.e. unencrypted), because your data still changes between a lot of hands before it gets to the place that puts in into an additional envelop (additional layer of encryption).
VPN isn't a software package that exists on your device. It's a server that exists on a computer somewhere else, and your data goes through other servers to get there.
IP2 is not a VPN. I think you're confused by the word "private" in VPN. "Private" does not equal "privacy".
Perhaps, or perhaps not. You aren't giving them enough credit. Web browsing traffic looks a lot different than BitTorrent, which looks a lot different than a video streaming service, even if it's all encrypted.
You're completely forgetting about client-side tracking, which encompasses most of the tracking that goes on.
You are not
directly connecting to a VPN. If you're sending unencrypted information on a wireless network (passworded or not) for example it's possible for an attacker to see it.
It's not some magical thing that prevents malicious activity and keeps everything secret.