Ubuntu – When installing I’m given the option of encrypting the home folder — what does this do

Simply

1. Encrypting your home folder doesn't actually make your computer more secure - it simply makes all the files and folders in your home folder more secure from unauthorized viewing.
   • Your computer is still "vulnerable" in a security standpoint - but it becomes very difficult for your content to be stolen (unless the attacker has your password).
2. You won't need to actually enter your password any more than you normally do - when you log in to your computer your files are seamlessly decrypted for just your session.
3. There is a possibility (depending on your computers hardware) that this will affect the performance on your machine. If you're worried about performance more than security (and you're on an older machine) you may wish to disable this feature.

Technically

Ubuntu uses "eCryptfs" which stores all the data in a directory (this case the home folders) as encrypted data. When a user is logged in that encrypted folder is mounted with second decryption mount (this is a temporary mount that works similar to tmpfs - it's created and run in RAM so the files are never stored in a decrypted state on the HD). The idea is - if your hard drive is stolen and the contents read those items aren't able to be read since Linux needs to be running with your authentication to create the successful mount and decryption ( The keys are SHA-512 encrypted data based of several user aspects - the keys are then stored in your encrypted key ring ). The end result is technically secure data (as long as your password isn't cracked or leaked).

You will not have to enter your password any more than usual. There is a slight increase of Disk I/O and CPU which (depending on your computer specs) may hinder performance - though it's quite seamless on most modern PCs