Apart from being able to encypt an entire volume, what are the other differences of FileVault 2 over FileVault?

Solution 1:

Borrowing heavily from John Siracusa's Lion review...

FileVault 2 is a Whole Disk Encryption system, as opposed to just a 'store your home folder in an encrypted disk image' solution. It's implemented as a filesystem layer below the actual volume that you unlock at system boot time. If you're familiar with LVM, it's much the same way. Whenever you get past the password lock, everything looks the same to the rest of the system.

As Steve mentioned, the encryption work can be aided by specialized processor instructions, and runs entirely in the background. What's nice is that you can turn disk encryption on a full drive, and everything will be done at leisure (you can shut it down, bring it back up, etc. and everything will continue).

Solution 2:

Password less 'Guest' accounts can no longer be created since the whole disk is encrypted than just the User's home directory. It's sad that I could not find any information on the kb article in Apple about this.