When Mac OS X 10.7 Lion introduced full disk encryption, called FileVault 2, it was a huge improvement over the original FileVault, which only encrypts a user’s home folder. And because of the “creative” way FileVault was implemented, there were numerous incompatibilities, gotchas, and caveats to its use. FileVault 2 on the other hand, encrypts individual disk blocks so the encryption is invisible to the file system and really doesn’t get in the way of normal use. Adding to this is another new feature in Lion: the recovery partition and the network recovery system introduced in last year’s hardware.
In almost all cases, these new features will work together without trouble. Still, there are a few things you should know, especially if you use encrypted Time Machine backups and if you can’t depend on fast Internet connectivity to be available should your boot drive fail.
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Lion’s FileVault 2 and disk restore: caveat encryptor