Time Machine finally supports encryption; here's how to activate it.
At the Time Machine preference pane, go to Select Disk... and select the disk you're currently using for backup. Check the checkbox in this dialog to Encrypt backup disk. Give it a good password, and never lose it. You probably won't need it ever again unless you recover the backup from a different machine, so remembering it would be tricky.
Requirements for encryption are just Mac Extended (Journaled) file system on a GPT-partitioned disk. I'd speculate it uses the same method as FileVault2, but I don't know.
It does appear to be non-destructive. When I enabled it, it did a long 'preparing for encryption' step (probably a check disk), a quick backup, and now its sitting there encrypting. It is taking a while too, so it might encrypt the whole file system, which will block recovery from anything older than Lion.
Post experiences below. Just to be safe, have another good backup on another disk.
[crarko adds: I don't need encrypted backups, but if you do, the option is now there. As mentioned in the hint, expect this to take quite a while the first time.]
Mac OS X Hints