Will Time Machine backup of an encrypted HDD be encrypted? My MacBook is running Mac OS X Mavericks with FileVault HDD encryption. I use Time Machine to backup this drive to an unencrypted USB HDD.

Will this backup be encrypted? Or does Time Machine decrypt files from my internal HDD and save them in an unencrypted form on the USB HDD?
No - Time Machine will not preserve the encryption of the source disk since it reads the files in an unencrypted manner just like any other process once you log in to the Mac.

You would need to ensure that all Time Machine destinations are also encrypted to properly secure your data both on the main computer as well as have it encrypted on the Time Machine volumes. This is as easy as ticking a checkbox on the Time Machine preference pane in system preferences.

On macOS 10.12 Time Machine will throw a helpful notification if you do in fact select an unencrypted destination for encrypted OS.