Encapsulation is the principle that lets us take protocol layers and let them easily share the storage within a package.
The data payload of a layer is the whole data + header from the previous layer. When a layer receive data from the last layer, it Encapsulates the data into a payload and send it to the next layer with its header. So layer N data is payload to layer N - 1.
Encapsulation allows you to layer recursively. See TLS model.