Q: restoring phone from encryption

If you have encryption backup, you do not need the password to backup BUT to restore you need the password.

If you forget the password, you cannot restore from backup. You have to restore as new.

Warning: Make sure it's a password you will remember or write it down for safekeeping. If you encrypt an iPhone backup in iTunes and forget your password, you can't restore from backup and your data will be unrecoverable.

From http://support.apple.com/kb/HT4946

Tips to try & recover your password here:

http://support.apple.com/kb/TS5162