I recently installed TrueCrypt and have been experimenting with it. I
have discovered a couple of by-products or using it with a backup
system like Carbonite, which I use.
1. While the drive is mounted, the files are in the clear to all
programs running on the machine. Before I realized this, Carbonite,
which backs up continuously, had backed up all of the supposedly
encrypted files on my test volume. With Carbonite, I am able to
designate a volume to be excluded from backup, but I must do this
explicitly. This may not be a problem for some people.
2. If the TrueCrypt file is very large (gigabytes), Carbonite excludes
it from backup by default. I can override this, but I have to
explicitly do it. This is one of the drawbacks of these
all-you-can-eat backup systems. They play games to keep you from
eating too much.
3. If you change anything on the TrueCrypt volume, the file gets
modified and must be completely backed up again -- even if only a few
bytes actually changed. If the file is in the GB range, that could
take days to back up every time it changes.
I don't know any way around any of these.