At OpenSourcery we have a policy that all user workstations, be it laptops or desktops, must be fully encrypted.
With everything on disk under encryption, users are free to auto-login their desktop session, which allows us to continue to use one passphrase per bootup.
With this encryption in place, users are free to save passwords in browsers, login credentials for email clients, and cache svn authentication; all this information is stored in the users home directory and part of the encrypted filesystem.
One major benefit of this system is I don't have to be pushy talking to users about what data is located where, and how confidential information is used locally on a device. Users don't need to know what is cached in /tmp, that ssh passphrases can be exist in swap, or that they decrypted a gpg file locally and forgot to clean it up for a few weeks. This is on top of the obvious benefit that stolen equipment contains no useful data.
Recent versions of Ubuntu have provided an easy installation method for using LUKS (Linux Unified Key Setup). The catch is you need to download and use the Alt install CD. Select "Use LVM and encryption", provide your passphrase twice, and everything on disk will be encrypted (minus a small /boot partition where no sensitive data is stored and is used to get the kernel going to support LUKS).
A couple months ago I manually formatted an external USB drive with LUKS. This was to make a backup of my entire laptop prior to going on vacation (yes.. I really need to ditch the laptop during vacations). After the rsync I put the drive under my desk and forgot about it.
All our important data is stored in svn repositories, so it's rare that I need to make a full backup of my laptop. Kicking the drive a couple times by accident reminded me I was due for another full backup.
Upon connecting the USB cable I was presented with a Gnome window detecting the LUKS configuration and asking for my passphrase. This was unexpected, and though I'm quite capable of hacking crypttab and using cryptsetup, plug-n-play disk encryption is quick and easy (this was under Ubuntu 8.04).

Ubuntu 8.10 brings a new encryption feature during the Alt install (which I use 99% of the time over the standard desktop installer). Encfs is a new option during install that asks if you want your home directory to be encrypted. Instead of LUKS block level encryption, EncFS is an abstraction layer for per-file based encryption with views to hide the encrypted files. I will need to do some research on this method before I recommend its use, but it's good to see Ubuntu trying to incorporate security with user-friendliness.
With data becoming more important, and computing devices becoming smaller, no device should be running in unsecured environments without storage encryption.
Official LUKS Website
Useful Ubuntu/Debian HOWTO