Explanation
Fault tolerance is the ability of a system to continue to function in the event of a failure of some of its components.
In this question, you could have servers that are replicated across datacenters.
Availability zones expand the level of control you have to maintain the availability of the applications and data on your VMs. Availability Zones are unique physical locations within an Azure region. Each zone is made up of one or more datacenters equipped with independent power, cooling, and networking. To ensure resiliency, there are a minimum of three separate zones in all enabled regions. The physical separation of Availability Zones within a region protects applications and data from datacenter failures.
With Availability Zones, Azure offers industry best 99.99% VM uptime SLA. By architecting your solutions to use replicated VMs in zones, you can protect your applications and data from the loss of a datacenter. If one zone is compromised, then replicated apps and data are instantly available in another zone.
https://docs.microsoft.com/en-us/azure/virtual-machines/windows/manage-availability

Explanation

Box 1: No
Azure firewall does not encrypt network traffic. It is used to block or allow traffic based on source/destination IP address, source/destination ports and protocol.
Box 2: No
A network security group does not encrypt network traffic. It works in a similar way to a firewall in that it is used to block or allow traffic based on source/destination IP address, source/destination ports and protocol.
Box 3: No
The question is rather vague as it would depend on the configuration of the host on the Internet. Windows Server does come with a VPN client and it also supports other encryption methods such IPSec encryption or SSL/TLS so it could encrypt the traffic if the Internet host was configured to require or accept the encryption.
However, the VM could not encrypt the traffic to an Internet host that is not configured to require the encryption.
References:
https://docs.microsoft.com/en-us/azure/security/azure-security-data-encryption-best-practices#protect-data-in-tra