Not really confirmed since we're only looking at AOSP 7.0 and Pixel devices are the first phones shipping this feature with 7.1.
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It's possible that it purges the keys on logout in 7.1. Have no idea until they push the code or someone looks at binaries.
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It's not going to do it when the screen is simply locked though, for obvious reasons. It won't ever do that for this part of it.
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Protecting data at rest means splitting up data into 3 categories instead of the 2 that they already have + apps adopting it.
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Or letting the user pick how to map the existing 2 into the necessary 3.
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They could force apps to adopt it by making the default the secure one at a new API level. Likely won't happen that way though.
End of conversation
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