Is data stored and protected within our own Azure/ServiceNow/SCOM

The data is never stored. When you implement the ServiceNow Incident connector you import a Management Pack into SCOM.

This Management Pack sends the selected alerts to the ServiceNow Incident connector in Azure. The alerts are put on a queue for conversion into ServiceNow incidents.

In this process, the alerts are never stored on any persistent storage and all communications from the Management Pack to the ServiceNow connection are encrypted by SSL certificates.