What is the point of encrypting the home directory?
The point is to protect against your disk being accessed outside of the OS.
Encryption is useful against attackers who have physical access to your computer. Without it, it would be trivial to read out the content of your home directory, for example by plugging in a live boot USB stick.
The Linux permissions only work on your own system. If you take the disk and put it in another computer, or just boot another OS on the same computer that can read your Linux partition you will plainly see that the permissions do not prevent you from accessing the content of your home directory.
In addition to answers, there are a few minor caveats that one must keep in mind about these encrypted configurations.
When you are not logged into your system, data in your home directory is not accessible in plain text. This, of course, is by design. This is what keeps an attacker from gaining access to your files. However, this means that:
- Your cronjobs may not have access to your Home Directory
- SSH public key authentication into your system also will not work, unless you put your public key somewhere outside of your home directory and symbolically link it to your unmounted $HOME/.ssh/authorized_keys.
You can put your authorized_keys directly in your unencrypted home directory by following these directions without the need for linking it anywhere else. https://bugs.launchpad.net/ubuntu/+source/openssh/+bug/362427/comments/12