Do not delete that. That is the permanent copy of all of your files. If you delete that, you will lose everything, and have to restore from your backup (assuming you have one).
FileVault works by creating a disk image (the sparsebundle you found), and encrypting it. Everytime you log into your computer, it opens up that sparsebundle and you work from the files contained within (invisibly to you). When you log out, all those files are wrapped back up and are now inaccessible without your password.
Again, DO NOT DELETE THAT FILE.
jW