File Vault 2 and embedded 'Recovery HD' disk are new additions to OS X in Lion release.
A fresh OS X Lion installation creates 'Recovery HD' by live re-partitioning 'Macintosh HD'. The recovery disk is 650MB in size (as of 10.7.2), of partition type Apple_Boot, and therefore, will be hidden during normal usage by OS X user interface. It does not show up in Finder, and not even 'Disk Utility.'
If the recovery disk 'Recovery HD' is proper, booting up a Mac without File Vault 2 while holding down the Option key will result in listing 'Recovery HD' as an alternative to 'Macintosh HD' for booting the machine up. For Macs with File Vault 2, only holding down the Cmd+R key combination will boot 'Recovery HD.'
The 'Recovery HD' of a Mac without File Vault 2 contains 'Base System Install', which is a minimal OS X kernel plus useful utility applications (Disk Utility, Time Machine, Network Utility, Pasword Utility). The main purpose is to allow partitioning a hard disk and restoring the system from a Time Capsule via the Time Machine application.
The 'Recovery HD' of a Mac with File Vault 2 does not contain 'Base System Install,' but only CoreStorage components and a minimal kernel for authenticating a user to Core Storage, to get a File Vault 2 (Whole-Disk-Encryption) protected disk mounted. Therefor, once File Vault 2 is turned on, your Mac will loose the ability to boot 'Base System Install'. The only way to start a Time Capsule restore is to boot from a Lion Installation DVD (or USB), if you had one made from the downloaded Lion installation app from the AppStore (instructions are widely written in web articles, please search the web).
When a Lion Mac is restored from Time Capsule via the Time Machine application, as of 10.7.2, the 'Recovery HD' will NOT be recreated. A Mac with File Vault 2 previously enabled will also be restored with File Vault 2 disabled; i.e. the disk will NOT be encrypted (this is right thing to do IMO). Without 'Recovery HD', File Vault 2 cannot be enabled anymore. This is a BIG problem for Mac owners who need stronger assurance of data security.
This article is a collection of my experiences in fixing this plight I had to face after restoring my Mac after my Seagate Momentus 500GB (G-Shock) crashed badly.
As with everything related to direct disk manipulations, here is an important disclaimer: The suggestions here are merely suggestions that may work, complete data loss may result, the risks are yours and only yours to bear. Please do not do anything I said if you are not willingly to bear all consequences.
First, let's be clear - if you had not backed up your 'Recovery HD' all bets are off for a quick and easy fix.
How to backup 'Recovery HD'
Apple has released the Recovery Disk Assistant that will help create a backup of 'Recovery HD' on a USB Disk, *provided* that your 'Recovery HD' is healthy. Unfortunately, tthere is no documentation on what is healthy. It turns out that here is a wisdom that I learned through the ordeal : If you intend to enable File Vault 2, perform backup of 'Recovery HD' TWICE, i.e. get yourself two 1GB USB Disk. Do the first backup before you turn on File Vault 2 to keep a copy of 'Recovery HD' with 'Base System Install'. Do a second backup after you turn on File Vault 2 to keep a copy of 'Recovery HD' which contains Core Storage aware mini kernel to mount your encrypted disk.
The one you need to restore 'Recovery HD' is the first backup (made before File Vault 2 enabled).
What if you had done neither? Based on three days of experimentation with a few different Macs, the following exceptions may save your day: make a backup from any Mac with OS X Lion 10.7.2 that does not have File Vault 2 enabled. It worked for me, but Apple said you should not do this; please weigh the risks yourself. The worst consequence here is that you will not be able to boot 'Recovery HD' or it does not appear as boot choice.
WARNING: Do NOT use a backup of 'Recovery HD' from other Mac that has File Vault 2 enabled.
CASE 1) You bought your Mac with OS X Lion
If your Mac get serviced by Apple and the hard disk got replaced, if you had OS X Lion when you first purchased the Mac, the new hard disk will have 'Recovery HD'. Make a backup of your 'Recovery HD' before you proceed to restore from Time Capsule. You will still have 'Recovery HD' after restoring from Time Capsule.
CASE 2) Clean-install minimal OS X, Restore from Time Capsule
If you read this far and cannot get yourself a copy of backed-up 'Recovery HD', here is the only remaining alternative for you to get back 'Recovery HD' so that you can enable File Vault 2 after that:
> diskutil list /dev/disk0 #: TYPE NAME SIZE IDENTIFIER 0: GUID_partition_scheme *90.0 GB disk0 1: EFI 209.7 MB disk0s1 2: Apple_HFS OSXviiSSD 89.0 GB disk0s2 3: Apple_HFS Recovery HD 1.07 GB disk0s3
> diskutil unmountDisk disk0 > gpt show disk0 start size index contents 0 1 PMBR 1 1 Pri GPT header 2 32 Pri GPT table 34 6 40 409600 1 GPT part - C12A7328-F81F-11D2-BA4B-00A0C93EC93B 409640 310902592 2 GPT part - 48465300-0000-11AA-AA11-00306543ECAC 311312232 1269544 3 GPT part - 48465300-0000-11AA-AA11-00306543ECAC ... > diskutil unmountDisk disk0 > gpt remove -i 3 disk0 > diskutil unmountDisk disk0 > gpt add -i 3 -s 1269544 -t %Apple_Boot% disk0 -OR- > gpt add -i 3 -s 1269544 -t %426F6F74-0000-11AA-AA11-00306543ECAC% disk0 > diskutil unmountDisk disk0 > gpt show disk0 start size index contents 0 1 PMBR 1 1 Pri GPT header 2 32 Pri GPT table 34 6 40 409600 1 GPT part - C12A7328-F81F-11D2-BA4B-00A0C93EC93B 409640 310902592 2 GPT part - 48465300-0000-11AA-AA11-00306543ECAC 311312232 1269544 3 GPT part - 426F6F74-0000-11AA-AA11-00306543ECAC ... > diskutil unmountDisk disk0 > gpt -l Recovery\ HD disk0s3 > diskutil list /dev/disk0 #: TYPE NAME SIZE IDENTIFIER 0: GUID_partition_scheme *90.0 GB disk0 1: EFI 209.7 MB disk0s1 2: Apple_HFS OSXviiSSD 89.0 GB disk0s2 3: Apple_Boot Recovery HD 650.0 MB disk0s3
> diskutil list /dev/disk0 #: TYPE NAME SIZE IDENTIFIER 0: GUID_partition_scheme *90.0 GB disk0 1: EFI 209.7 MB disk0s1 2: Apple_HFS OSXviiSSD 89.0 GB disk0s2 3: Apple_Boot 650.0 MB disk0s3 /dev/disk1 #: TYPE NAME SIZE IDENTIFIER 0: FDisk_partition_scheme *1.0 GB disk1 1: Apple_Boot Recovery HD 650.0 MB disk1s1
> dd if=/dev/disk1s1 of=/dev/disk0s3 bs=32768
Mac OS X Hints