I think there's something in what you're saying, vinky87.
I receently encountered this problem when my iPhone 4S didn't want to upgrade from iOS 5.0.1 to 6.1.3 properly.
I checked to see if I had made a secure backup recently, the latest one was from the 1st of October 2012, a bit too far back so I made a new one. The encryption-box was unchecked and the old, and also ONLY, back-up was not encrypted. After factory-resetting the phone all back-ups turned out encrypted.
How fun...
But after much back and forth and stress and rage, including losing my recent back-up because it was overwritten when I tried to back-up and change the password to something I knew as has been suggested earlier in this thread, I typed in "herpderp" because I had the wrong field high-lit when trying to make a FB-post about this mess.
I pressed enter, and there it was: "restoring iPhone"
Sure, I lost about half a year of notes, information, and photographs and other such nice things, but with the majority (information all the way back from when I got my first iPhone 3-4 years ago) of thigns being as they had been, I'm now much calmer.
The fun part is that herpderp was a password I tried to change my third hotmail account into using, but it didn't accept it due to lack of digits and capitalized letters. other than such I have never used it before, and I know with 100% certainty that I did not have the back-ups encrypted before I reset my phone to the factory-state.
But having read this thread I certainly think that Apple should investigate in possibilities of requiring a hint to also be chosen when the encryption option for back-ups is selected, and then that a reminder of your current back-ups being encrypted and how to disable said encryption being shown before you start backing up the phone next time and all the times that follow as long as one of the existing back-ups is still encrypted.