The traffic is encrypted between my computer and a VPS located abroad that I rent, which acts as a sort of proxy. My ISP only sees traffic between me and the VPS.
All VPN software might affect bandwidth due to the increased progressing needed for encryption, but quantifying it is hard because several factors come into play : mainly the hardware and bandwidth on either side of the tunnel. Giving it a go is easy and you can check which VPS specs give you the speed you require. Regarding the number of connections, I'm not sure of the answer. For all intents and purposes I don't run into a lot of problems on a daily basis and bandwidth is acceptable on a cheap 4€/mo VPS with 2 CPUs.
Bonus tip for privacy, you can use port 443 for wireguard which makes it less obvious you're using a VPN.