Yes, all GSM calls use an A5/1 stream cipher. It has been found that this is fairily easy to decrypt using a Rainbow Table. Additionally, the FBI admits to intercepting all phone conversations in the US.
So yes, it is encrypted, and cell phone companies don't give a fuckdamn about your privacy. If you care about privacy, you should use RedPhone and TextSecure which is an open source projects by Whisper Systems (now apart of Twitter).