Communications are still encrypted over the wire with a self-signed cert, yes, but with self-signed certificates, the issue is that you can't be sure that you're really talking to who you think you're talking to.
I could be an attacker on the network, and I could be pretending to be SERVER01, and I could even present you with a certificate that says that I'm SERVER01... and because you always get certificate errors anyway,
you're already mentally conditioned to ignore this certificate error too. Only this time you're talking to a bad guy that's showing you a webpage that looks just like th…