Here's a link to an Apple security article that describes several aspects of iOS security
https://www.dropbox.com/s/s1odub1l0apests/iOS_Security_Feb14.pdf
The section that deals with data protection & pass codes starts on page 8
Thanks, I took a look at that section. It's a bit technical for me, but I think it helped a bit with my understanding.
Expanding the discussion a bit beyond the data protection feature, my main security concerns if I lost my device or had it stolen are 1) access to my data if the flash storage is removed from my device to be read elsewhere, and 2) bypassing the passcode to read the data in situ.
From what I've read, here's my understanding on how iOS mitigates these threats. I'd be grateful if someone could confirm or correct my understanding.
1) All data in flash storage is encrypted by an on-device encryption chip that sits between flash storage and RAM. It uses a device-specific unique encryption key. This happens even if no device passcode is setup. This means that if flash storage is removed from the device, it can not be read by any other device. It also facilitates instant wipe - because all that is needed is a reset of the device specific encryption key.
2) If someone has a functioning device in hand that is pass-code protected, a potential route in would be to bypass the passcode (e.g. via a jailbreak). Potentially this would give them access to everything on the device because the on-device encryption chip is now decrypting data from flash storage on the fly. However, the data protection feature mitigates against this. It's another level of protection that builds upon the hardware encryption key by creating another hidden key (based on some combination of passcode and device-specific key) to control on-device file access. The data protection feature is not something that is enabled/disabled independently of a passcode lock. It's always (and only) enabled if you are using a passcode lock. It's up to developers of individual apps how to use the data protection APIs to store data. Amongst other levels of protection, they could choose to give files complete protection (in which case they would not be readable if someone used a jailbreak to bypass the passcode lock) or they could choose to use no extra protection (in which case they would be accessible if someone used a jailbreak to bypass the passcode lock).