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The correct service utilized for encrypting and protecting shielded VM templates in Azure is the Shielded Template Disk Creation Wizard. This tool is specifically designed for creating shielded virtual machine templates, which provide enhanced protection for virtual machines against unauthorized access and tampering.

The Shielded Template Disk Creation Wizard employs various security features, including encryption and key management, to ensure that the virtual machine templates are secure. This helps maintain the integrity and confidentiality of the templates, which is essential for organizations that require robust security measures for their virtualized environments in Azure.

In contrast, while services like Key Vault and Azure Information Protection provide important security functions, they are not specifically tailored for the creation and management of shielded VM templates. Key Vault primarily focuses on safe storage and access management for secrets, keys, and certificates, while Azure Information Protection is centered around protecting sensitive information through classification and labeling. Azure Security Center offers a comprehensive set of security management tools and threat protection across Azure environments but does not directly manage the creation of shielded VM templates.