Encryption and decryption of the messages are done with Steem account (memo key) and messages are stored off-chain on eSteem backend for the reason I have briefly talked in post. Since all messages are encrypted (nobody knows content of the message) we can provide API and sample scripts for any other apps to use if they choose to integrate it. Unfortunately, it is not replacement to any other messaging apps that has their own users(base). But for now why postpone feature if we can implement it with what we have/can. Later if we will have pruning functionality, storing messages on Steem blockchain would make more sense and can easily be adopted by eSteem and other apps.
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Are you going to encrypt the fact of sending a message? In other words, if Alice sends a message to Bob a third-party will not be able to decrypt the content of the message, but the fact that Alice is writing something to Bob will be publicly available to everyone, is that correct?
If we make API public yes, otherwise it stays on eSteem servers for 7 days before erased. Note that it is off-chain and if it was on-chain that would be traceable unless we have stealth transactions.