FileVault 2 requirements

FileVault 2 requires OS X Lion and Recovery HD installed on your startup drive, which the OS X Lion installer will attempt to create at installation. If you receive an alert that no Recovery HD could be created and continued to install OS X Lion, you will be unable to use FileVault 2. See this article for more information. Please note that Recovery HD must be present on your computer's startup volume to use FileVault 2 (not an external Recovery HD).

Turning on FileVault 2

FileVault 2 is managed via the Security & Privacy preference in System Preferences. Click the FileVault tab in the Security & Privacy preferences and you can enable or disable FileVault.