How much protection does Filevault really provide?

I have a new Macbook Pro laptop
I have it set so that it does NOT automatically log me in. My password is required upon bootup.
But I am fully aware that anyone with an install disc can boot up my machine and change my password.
I want to have full protection should my laptop ever get stolen / fall into the wrong hands because of how much information someone could potentially have access to.
I know Filevault encrypts the home folder.....but does this mean it could provide protection for that kinda of a situation, so that even if someone changes my login password with an OS X install disc, that they would NOT have access to any of my addressbook info or files, etc?
thank you

Yes. If you want to further protect against booting with external disks, investigate firmware protection as described in http://docs.info.apple.com/article.html?artnum=106482

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How much protection does Filevault really provide?

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