I had device encryption enabled, but I wiped and factory reset my phone just to undo the encryption. I used it with encryption for about two months, and during that time, I had the phone reboot on me in the middle of the night a few times -- since it won't complete booting until you enter the password, this means no alarms, as chhall mentioned.
The phone might still reboot in the middle of the night without encryption, but at least the alarms will work...
The phone also takes a very, very long time to boot with encryption enabled. I think it's around 2.5 minutes from hitting the power button to getting a cellular signal -- without encryption on my phone, it takes about a minute. It's long enough that the guy at the Verizon store commented on it when I went in with a problem. This gets very annoying if you're flying, for example, since you have to boot the phone several times in a day.
Plus, I found that it's a bit useless if you leave USB debugging enabled, as probably many on this forum do. Even if the phone is encrypted, you can still access the phone through adb without entering a pin if the phone is already running. Sure, this isn't a problem if you only have the USB debugging enabled when you need it, but if you forget and leave it on...
I really wanted to have my phone encrypted, but I couldn't live with the problems above. I now use a security app that has remote wipe capability and just hope I can wipe my phone before somebody steals my data

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