If a company says “encrypted at rest” that is generally compliance-speak for “not encrypted, but the hard drive partition is encrypted”.
Various certifications require this, I guess because they were written before hyper scalers and the assumed attack vector was that someone would literally steal a hard drive.
A running machine is not “at rest”, just like you can read files on your encrypted Mac HDD, the running program has decrypted access to the hard drive.
"encrypted at rest" is great to guard against stolen laptops, or in the server room both against people breaking in and stealing servers (unlikely at the security level of most hyperscalers, but possible) or more commonly broken HDDs being improperly disposed
How does that transalte to VMs? If "encryption at rest" is done at the guest level, instead of (or in addition to) host, that would be pretty close to minimal "encrypted except when it use" time and protect against virtual equivalents of pulling a hard drive out of a data center.