We report on a new physical layer optical encryption approach based on quantum noise limited optical signals and M-ary optical phase shift keying that operates at high data rates. In contrast to established encryption methods that rely solely on deterministic algorithms, this system utilizes quantum noise to realize a randomized cipher. Keyed M-ary optical phase modulation is used to encrypt quantumnoise limited mesoscopic signals (50k photons/bit) that are compatible with current directions in optical networking: the physically encrypted signals may be optically amplified, routed through optical switches, and can propagate over long distances approaching 1000 km. We describe the approach in detail and report on results of experiments in which these encrypted signals were transmitted over an 850 km network at 622 Mb/s. Bit-error rate measurements were performed under varying network conditions. Our paper concludes with the engineering challenges for extending this approach to 2,5 Gb/s and beyond and how these are being addressed.