text: FileVault works by storing a user's files in an encrypted disk image file. Disk images are familiar to OS X administrators — many large organizations set up their OS X machines by restoring a disk image to the machine's hard drive, and many software installers are distributed in the form of disk image files. FileVault uses a disk image that is encrypted with the user's login password. When the user logs in, his or her password is used to unlock the disk image. The image is then mounted under /Users/<username> and for the most part, looks and behaves like a normal user home folder.
  There are two primary risks associated with implementing FileVault for your users. The first is that they forget their password and cannot access their data. Since the password is the same as the login password, this seems an unlikely scenario, but there are other ways a user can lock themselves out of a FileVault-protected account. It's not uncommon for organizations to implement a web page that all users can go to change their password. If, however, a user with a FileVault-protected account does this, the FileVault disk image is not updated with the new password – this only happens if you use the Accounts preferences pane to change your password. Another way the password can get out of sync is if the user has multiple machines, and changes their password on a machine other than the laptop with the FileVault-encrypted home directory. Apple has provided a way for administrators to unlock FileVault disk images – this is the FileVault "master password". We'll look at this later in the article.
  10.5's Security Preference pane – FileVault tab
  Enabling password hints is itself considered a security risk in many organizations, so consider if you really want to do this. If you don't, there is no way from the GUI for an admin to recover a FileVault-protected home directory — but an admin can still do so from the command line.