A network-based appliance includes a mechanism to set-up and selectively use an “out-of-band” encryption channel. The mechanism comprises a packet parser, and a packet dispatcher, and it is integrated with an existing network layer stack that typically is not visible to host applications. In lieu of simply encrypting all data it receives, the mechanism instead analyzes one or more attributes, e.g., protocol type, application type, current encryption strength, content payload, etc., associated with a packet transmission to determine whether further encryption is required. The evaluation may include a deep packet inspection (DPI) when the information at the network layer (e.g., IP address, port number, etc.) is not sufficient to determine if the payload in the packet needs to be further encrypted. Based on the result of the analysis, packets are dispatched to the encryption channel as and when necessary. When additional encryption is not necessary, however, packet(s) are instead dispatched through an ordinary non-encrypted channel.