Encrypt Backup Password Problem

I checked the option to encrpyt the back up using a password. Any password I try cannot be used - I've tried my itunes password and a variety of others - I just keep getting a message saying the password cannot be set. It worked fine until a couple of days ago. Any ideas?

Yeah I just noticed I have the same issue. Google and Bing search doesn't help much either but I did land on this Apple Support page:
http://support.apple.com/kb/HT1766
To summarize:
WARNING: If you encrypt an iPhone backup in iTunes and then forget your password, you will not be able to restore from backup and your data will be unrecoverable. If you forget the password you can continue to do backups and use the device, however you will not be able to restore the encrypted backup to any device without the password.
If you cannot remember the password and want to start again, you will have to do a full software restore of the device, erasing all data.
But to be honest, I don't recall even setting a password for any kind of encryption backup. Even if I did, I would know since I use a set of passwords for everything... Was there a bug in iTunes since the new update?
Message was edited by: haotan

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