If you encrypt an iPod Touch backup on iTunes and then forget your password, you will not be able to restore from backup and your data will be unrecoverable. If you forget the password, you can continue to back up and use the device, however you will not be able to restore the encrypted backup to any device without the password. You do not need to enter the password for your backup each time you back up or sync. If you cannot remember the password and want to start again, you can use a SmartKey iTunes Backup Password Recovery to unlock iTunes backup password at first.