Yeah, it's for people with very sensitive data, either corporate or government users mostly. I turned it on for a while, mostly to play with it, and it is indeed transparent-- you don't even know it's running, unless you try to access that account while booted from another OS X volume. But, it royally screwed up my automated backups, because the compressed file that contains your home folder is hidden deep in the system... so i wound up turning it off.
Bottom line: if you have to ask, you probably don't need it.
paul