Is FileVault distinct from Finder's "Encrypt ..." command?

I'm confused by the variety of methods for encrypting drives in Mountain Lion. There are at least four methods,

1. FileVault in System Preferences;
2. Finder's "Encrypt..." command;
3. Disk Utility's "Erase" command, specifying an "Encrypted" format; and
4. Disk Utility's "New Image" command, specifying an "Encrypted" format;

but it's not clear to me what the differences among them are.

I understand that the first two allow for in-place encryption, but I'm not clear on the differences among products of these different methods. Specifically,

• Is the encryption the same for each?
• Is (1) just a version of (2), applied to the boot volume?
• Why does the password entry dialog for a volume created with (4) differ from the dialog for the others?
• Why is the format for disk images created using (4) not "encrypted" (though it is at least a familiar Mac OS format), while mounted encrypted drives created with (3) are (though the format is an unfamiliar "Logical Partition")?

Solution 1:

Filevault's use the XTS-AES 128 encryption. As Finder's contextual menu encryptation option and the Erase with the Encrypted format use Filevault's system, the encryption is the same.

Disk Utility's, in the other hand, when creating an new image, lets you choose between a 128 or 256 bits AES Encryption.

These two methods are, therefore, different. The latter just creates a folder which requires a password to be opened, while Filevault is a lot more complex.

And for the Logical Partition, here is explained in detail.

How Does FileVault 2 Work? Compared to the bare file system, or even FileVault 1, FileVault 2 seems like magic. How does it work? The first thing to know is that Apple has included a Logical Volume Manager (LVM) with OS X Lion. This is what FileVault 2 gets to ride on top of. 

Physical media still exists—we really can’t get away from that, as the data need to be stored somewhere. CoreStorage doesn’t really care what the media is, though: traditional spinning-plater drives, SSD, USB storage or even a disk image. Represented above in green, we have three volumes that reside on some physical disks. These three volumes are converted into CoreStorage volumes and imported into a Logical Volume Group (LVG). This sets up a “pool” of storage. Volumes can be added to and removed from the pool after creation. A LVG is represented with a UUID. This LVG is then brought into a Logical Volume Family (LVF). An LVF maintains properties about the volumes in a LVG and presents these Logical Volumes (LV) to the system. CoreStorage creates new device nodes for each LV. As shown in the visualization above, the LVs, in blue, have a device node (disk1, disk2, disk3). The ‘key’ icon associated with the LVF shows that encryption is one of the properties maintained about the LVG. This is the layer at which the encryption key resides.

When you “Turn On FileVault…”, one of the steps converts your disk to a CoreStorage volume. Of course, when you “Turn On FileVault…”, only your boot disk is encrypted. Naturally, this fits Apple’s 99% case and is the right fit for the bulk of Mac users on the planet. That said, FileVault cannot and will not encrypt any other drives you may have attached to your system. That’s up to you.