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I'm not a big fan of partition- or directory-based encryption because at that point you are relying on applications and/or people to make sure sensitive information gets where it's supposed to go. And, we've all learned the hard way that you simply can't rely on this. All it takes is for a user to store a document someplace outside the encrypted area, and it's completely vulnerable.
Check out the entire Storage Encryption FAQ guide.
This was first published in October 2007
Storage Management Strategies for the CIO