iTunes offers the ability to encrypt your iOS backups that are stored on your computer. Turning this feature on or off is done via a simple checkbox on the iOS device's summary page in iTunes.
Encrypting the iOS backup on your computer helps protect your personal data in the event someone gets their hands on your computer or hard drive. But, according to Josh Sunshine at gigaom.com, there's another excellent reason to encrypt your iOS device backups:
There are other, non-security related reasons to encrypt your backups, too. If you restore a new iOS device from a backup of an old one, usually passwords such as mail account passwords aren’t stored, and you’ll have to enter them again on the new device. However, if your backup was encrypted, the passwords will be kept, making the transition to a new device that much easier.
Now that is terrific news! Every time I've upgraded to the latest iPhone I've had to reenter all of my email passwords. It's nice to know that checking a little box can not only provide better security on my computer, but also prevent excessive hassle when upgrading to the latest and greatest iOS device!