So, since Android 3, devices can perform boot-time, on-the-fly encryption/decryption of the application storage area (NOT the SDcard/removable storage) - essentially full-disk encryption. This requires a password/passphrase/PIN to be set as the screen unlock code and decryption key, unlock patterns cannot be used.

I have a suspicion that there is actually no benefit to enabling encryption, mainly because the memory chips that serve as the "hard drive" can't be easily removed like real hard drives in computers. I'm wondering if others can comment on my reasoning.

Scenario 1: Device is lost, or stolen by an opportunistic thief (i.e. unsophisticated)
With encryption -> Finder/thief can't gain access
With no encryption but with screen lock -> Finder/thief can't gain access

Scenario 2: Device is stolen by a sophisticated attacker, but they must leave no trace of the attack (therefore chip-off methods are excluded and the phone must be returned before the loss is discovered)
With encryption -> Finder/thief can't gain access
With no encryption but with screen lock -> Finder/thief can't gain access

Scenario 3: Device is stolen by a determined attacker, and the owner made to reveal the passcode under duress. Android doesn't have Truecrypts plausible deniability features.
With encryption -> Attacker gains access
With no encryption but with screen lock -> Attacker gains access

Are there any scenarios I've missed? So my conclusion is that there is no point to enabling full device encryption on Android - a screen lock will do. Discuss! (I am quite happy to be proven wrong, I just can't see how there is a benefit to it)

The advantages are limited, but there are nonetheless scenarios where encryption helps.

In any scenario where the attacker obtains the password¹ (with lead pipe cryptography, or far more realistically by reading the unlock pattern on the screen or brute force on the PIN), there is clearly no advantage to full disk encryption. So how could the attacker obtain the data without obtaining the password?

The attacker might use a software vulnerability to bypass the login screen. A buffer overflow in adbd, say.

The attacker may be able to access the built-in flash memory without booting the device. Perhaps through a software attack (can the device be tricked into booting from the SD card? Is a debug port left open?); perhaps through a hardware attack (you postulate a thief with a lead pipe, I postulate a thief with a soldering iron).

Another use case for full-disk encryption is when the attacker does not have the password yet. The password serves to unlock a unique key which can't be brute-forced. If the thief unwittingly lets the device connect to the network before unlocking it, and you have noticed the theft, you may be able to trigger a fast remote wipe — just wipe the key, no need to wipe the whole device. (I know this feature exists on recent iPhones and Blackberries; presumably it also exists or will soon exist on Android devices with full-disk encryption.)

If you're paranoid, you might even trigger a key wipe after too many authencation failures. If that was you fumbling, you'd just restore the key from backup (you back up your key, right? That's availability 101). But the thief is a lot less likely to have access to your backup than to your phone.

¹  Password, passphrase, PIN, passgesture, whatever.   
