This just means that the function has been deprecated in 3.2 and a similar function is now available using DotNetNuke.Common.Utilities.XMLUtils.XMLencode. While you can continue to use the function for now, you should try to convert all your code to use the new function. At some unspecified point in the future we may remove the deprecated method.
The warning you get is just a warning that reminds you to update your code. This allows us to keep refactoring and improving the core, and also notify developers of future breaking changes, so that hopefully developers will switch to the new function and thus prevent future compatability issues.
We are constantly looking at the DNN API and will continue to consolidate and improve the API. Since the API is written in an AD HOC fasion, we often find that some method is placed in a class where it really doesn't belong, or it is in a namespace that doesn't make sense. Sometimes, we expand whole areas of the API and want to consolidate methods in one place that provide a common set of services. In any case it is a good sign that we are working to constantly improve the developer experience.