KFX from Amazon always has encryption (AZW3 hasn't if publisher asks for DRM Free) and you can't natively convert to KFX. The Conversion to KFX uses an Amazon program that doesn't run on all OS.
AZW3 also works on older Kindles that don't support KFX.
KFX is designed for Whispernet. Amazon only delivers mobi or azw3 for download to later transfer for Whispernet.
Documents:
See differences on mobi (inc dual mobi) and azw3 output options tab/section on Calibre Conversion.
Don't use Send to Kindle.
The KFX "conversion" plugin (optional install) simply calls the command line options of an Amazon program. Calibre can't, nor any other non-Amazon program, create KFX files directly.
Mobi is using a subset of HTML3 with some extra commands and no separate CSS. It can't be edited in Calibre. The AZW3 is similar to epub, can be edited in Calibre and uses CSS and more like HTML5
HTML3 was released in 1997 and was obsolete before Amazon bought Mobipocket in 2005 (who created it). First Kindle was 2007.
HTML5 draft published in 2007.
Versions of HTML 5 were released in late 2014, late 2016 and late 2017. The AZW3 is similar to epub2 and it is a subset of HTML5
Older Kindles (at least K3) got new Firmware to support azw3 (KF8). Only the DX, DXG, K1 and K2 don't.
Epub2 was 2007 and has many elements of HTML5 and CSS2.
Amazon released azw3 in 2011, using CSS2 and HTML5. In 2015 Amazon released firmware updates for all the older ereader for azw3, except the the DX, DXG, K1 and K2. Apparently they don't have enough RAM. The DXG was technically after the K3 (which got AZW3) but is really just the DX with a better contrast screen, so it never progressed beyond 2.5.8
The 3.4.3 is oldest firmware with added AZW3 support:
https://www.amazon.com/gp/help/custo...MQC26VQQMM8XSW