The question and answer for Is it possible to use the 'screen' command to work with files on an encrypted home directory? helped me understand why this might be happening: being logged in via screen with ssh doesn't tell Ubuntu that you're still using the system and so after a while (overnight in my case) the encrypted home directory gets unmounted, so Vim can't save files it had open in screens, and the working directory on the command prompt becomes (unreachable).
I know that the problem goes away if I have an NX session logged in. NX might be described as screen for GUI; I just start an NX session and disconnect it (letting it run the background), and can continue using ssh/screen indefinitely. Not elegant or ideal but I use NX occasionally so it worked for me.
The linked question also suggests deleting the empty file in /home/.ecryptfs/$USER/.ecryptfs/auto-umount. This might help if you don't use NX.
You are being offered 2 layers of Encryption.
The first is LUKS. With LUKS your entire installation (except /boot) will be encrypted, including your home directory.
The second is ecrptfs and is used to encrypt your home directory.
In general there is no need to use the two together, but, you could if for example you have multiple users and you wish to keep data encrypted between users or from root access.
When you use LUKS, when you boot, the data in your /home will be decrypted and as long as the system is running, the data can be read by root and other users.
https://wiki.ubuntu.com/SecurityTeam/Policies#Permissive_Home_Directory_Access
If you so desire , you can restrict access to the data in your home directory by adjusting the permissions or by encrypting your home directory as well.
If you encrypt your home directory, your personal data will remain encrypted when the system boots and will only be decrypted when you log in.
HTH
Best Answer
Are you upgrading a previous install (or using an existing Home partion)?
If so this is most probably because you previously installed Ubuntu with an encrypted home folder. The installer automatially detects this. You cannot unset "Encrypt my home folder" as you would not be able to access your files otherwise.
It is very important that you select the same login password as before. If needed you can change it after the instalation.