Are the files in an encrypted dmg actually in plain text on the hard disk It seems standard to use Disk Utility to create an encrypted disk image. I would like to know how secure this is. I can imagine that the "encrypted" files are not really encrypted at all, and continue to lie on the hard disk in plain, unencrypted form. Are the individual files or file chunks themselves encrypted?

If one is lucky, one can recover deleted files from a hard disk. It might, as far as I know, be just as easy or maybe easier to recover files on an encrypted dmg.

My question is: what are the facts here? And how secure are the files in an encrypted disk images?
The files on an encrypted disk image are encrypted. 

As you can see currently you can have 128 bit AES and 256 bit AES.  As is pointed out 256 bit will be slower but more secure, however both methods will leave your data encrypted, until it is decrypted.



The real issue is how strong the password for the encrypted volume is.  If the password is not a random string of characters, but based on a dictionary word with substitutions of 1 for i etc, the files while encrypted might as well not be.



Ensure your password is based on a long sentence where you use all punctuation marks, include spaces, numbers and special characters.