I've been researching disk/file system encryption, and on the surface it seems like a good idea for a lot of things. But as I dig further, the security it offers seems more mirage like than real.
For example, it seems like there is little point in encrypting your file systems in a data center somewhere, because the employees there need to be have physical access to the system in order for backups to be made, replacing failed hardware, that sort of thing. And if the server reboots, you have to supply it with the key/passphrase for it to boot up. If you don't give them that, you probably have to figure out how to ssh in or something to provide that, which is a) a PITA, and b) not really that secure anyway, since if they can physically access the machine they could theoretically read the memory and the key etc.
If someone hacks in via the network, then it does not matter that your data is encrypted because if someone has root they will see plain text. So it seems to me that it would be more worthwhile putting effort into finding a data center with people/security you trust, OR hosting it yourself if you are that paranoid. Encrypting a filesystem on a system you don't have physical control over seems to me to be about as secure as DRM and for similar reasons.
Where file system encryption does seem to make some sense is in storing backups - if you store in multiple off-site locations, you may not be able to trust them as well, so encryption would be welcome. If you stored backups of the keys and pass-phrases in different areas, it still might be worth doing because it is a lot easier to hide a USB key than it is to hide a HDD or tape.
Another area it seems to make some sense is in a laptop. Keeping a USB key on your person along with an encrypted drive on your laptop would be good security if the laptop got stolen. Never letting the laptop out of your sight might be nearly as good though.
If you control physical security and have access to the machine (e.g. server, workstation or desktop at home for example), it could conceivably be a good idea to encrypt. Again, controlling and securing a USB key is a lot easier than securing a computer system.
Those are the conclusions I've come to so far, but there is a good chance I'm overlooking something - which is why I thought I'd ask here. Thoughts? Agree? Disagree?