I've been using FileVault for something like 3 years, and it hasn't failed me. I've simply encrypted my home folder and it has worked fine. Backups can be tough because you end up with a single huge sparse file that you just can't copy onto certain filesystems (ie. FAT)... and occasionally OS X needs to reorganize the sparse file when you reboot, which can take a long time.

Contrast it all with Linux - I just got encryption support with LUKS and the device mapper on my Asus EEEPc. Had to rebuild the kernel and do all kinds of other nasty things to get that working (see here if you're really interested ;) Gutsy disk encryption is looking better than it did (now integrated into the window manager) but still has some annoying bugs (I can't reliably insert, remove and insert again an encrypted USB drive for example)