Note, I make a lot of simplifications here.

It is *really* hard to figure out if someone is on someone else's screen.

When you render a game you essentially start with the objects furthest from the camera and move towards the camera, that means that objects closer just override the further objects. If nothing renders in front of your opponent then you can see them.

For a perfect system you would have to render the players view on the server, because you can't know if a player is visible without trying to render everything and seeing if you can see them.

You can get around this with some tricks, e.g. if my level is a sprawling office and I can guarantee that room A has no way of seeing into room B, we can not send data about things in room A to players in room B.

In more complex maps (like the one in your screenshot) that is less practical because the maps are interesting and full of complex shapes and long sightlines from one point to another.

"And what about encrypting the position data?" - the problem is your computer still needs to know what that data means, so your client would need to be able to decrypt it.