In the midst of tweaking a Time Capsule backup, I noticed a grayed out option to encrypt my backup.
Turns out 10.7 enables Time Machine encryption on Lion - but only for directly connected drives.
Reading the MacOS X hints commentary I think they're missing the point. A good backup strategy requires offsite backup, and taking a non-encrypted backup offsite is somewhat risky. I don't take my Time Capsule backups offsite, but I do rotate my Carbon Copy Cloner images/backups -- and they are encrypted.
This is a good feature if used wisely.