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I thought the data is encrypted?
Time Machine backups are non encrypted. But I don't know if files stored on Time Capsule can be encrypted (using Filevault or something like that).
In the case then, you can still use FileVault (system preferences) to encrypt files.
Actually, from what I've read so far, Time Capsule won't backup FileVault filesystems; actually Time Machine itself is not really FileVault friendly. IMO that's a big issue.
Yipes that's an unnecessary compromise for a small convenience. I'm sure that finding people's digital treasure troves and geotagging them will become a sport.