You can use FHE to encrypt functions, but the more standard use is to encrypt inputs and evaluate plain text functions (e.g. in a two part sort of protocol, see e.g. [1]). Regardless, the important difference to obfuscation is that once you're done computing, the output from FHE will still be encrypted. Somebody has to have a key to decrypt that and that key can most likely also be used to decrypt the function. In iO, the result comes out plain text.

[1] https://juliacomputing.com/blog/2019/11/encrypted-machine-le...