Disable Time Machine Encryption in Lion
With OS X 10.5 we can now enable Time Machine encryption via System Preferences → Time Machine → Select Disk…. Right in that menu it says “Encrypt backup disk”.
When activated OS X starts to encrypt your Time Machine backup. Depending on disk size this can take a while, but you can simply unplug/eject the drive without losing data. OS X will continue encrypting the drive after it’s been connected to your computer. You can even run Time Machine.
But what if you need to repartition that disk? Encrypted drives can’t be partitioned after they’ve been encrypted. To “un-encrypt” your Time Machine backup open Disk Utility, select your drive, click File and then Turn Off Encryption… from the menu. You’ll be asked for the drives’ password and then the same encryption process that encrypted the drive in the first place starts. You can, again, disconnect the drive and run Time Machine without any issues.