With File Vault ON are time machine backups encrypted?

No, the backups will not be encrypted automatically, but it's very easy to enable for directly attached disks. Just check "Encrypt Backup Disk" in the Time Machine disk selection settings.

If you're backing up to another Mac, you can use Disk Utility on that Mac to erase non-boot drives and put an encrypted partition on them:

No.

Time Machine backups are not encrypted by default. You have to opt-in. The configuration is easy if the backup drive is connected via USB/Firewire. If the backup drive is connected by Ethernet/Wi-Fi, the process of setting up Time Machine is more complicated.

Connected via USB/Firewire

Select the option in System Preferences → Time Machine → Select Disk

Connected via Ethernet/Wi-Fi

Basically, you need to manually create an encrypted sparse bundle on the external drive to which you will back up.

1. Figure out the name of your computer (and make sure it doesn’t contain spaces) in System Preferences → Sharing

2. Figure out the address of your main ethernet card. Type in the Terminal.app located at /Applications/Utilities/Terminal.app

   ifconfig en1 | grep ether
   

   MacbookAir: en0 is Wi-Fi
   Other Macs: en0 is Ethernet and en1 is Wi-Fi

   Write down the address for later use.

3. Open Disk Utility.app and create a new image:

   

   a) Save As: ComputerName_EthernetAddress (without ":")

   b) Name: ComputerName

   c) Size: Choose a custom size.

   d) Format: Mac OSX Extended (Journaled)

   e) Encryption: Choose what you prefer. 128-bit is faster

   f) Partitions: Single Partition, Apple Partition Map

   g) Image Format: sparse bundle disk image

4. Open Keychain Access.app and move the password from your personal keychain (login) to the system keychain.

5. Start to backup!

[source: Mac OSX Lion Secure Backup to Time Capsule with size limit]

I've used this solution for wireless encrypted backups in Lion myself for a while. However, it's quite slow.

Therefore, you should backup less often and allow it enough time to finish. You can use a free tool such as the TimeMachineEditor to perform backups at custom time intervals or calendar events.