The Encrypting File System (EFS) on Microsoft Windows is a feature introduced in version 3.0 of NTFS that provides filesystem-level encryption. The technology enables files to be transparently encrypted to protect confidential data from attackers with physical access to the computer.
EFS is available in all versions of Windows developed for business environments (see Supported operating systems below) from Windows 2000 onwards. By default, no files are encrypted, but encryption can be enabled by users on a per-file, per-directory, or per-drive basis. Some EFS settings can also be mandated via Group Policy in Windows domain environments.
Cryptographic file system implementations for other operating systems are available, but the Microsoft EFS is not compatible with any of them.
Fundamental Use
When an operating system is running on a system without file encryption, access to files normally goes through OS-controlled user authentication and access control lists. However, if an attacker gains physical access to the computer, this barrier can be easily circumvented. One way, for example, would be to remove the disk and put it in another computer with an OS installed that can read the filesystem; another, would be to simply reboot the computer from a boot CD containing an OS that is suitable for accessing the local filesystem.
The most widely accepted solution to this is to store the files encrypted on the physical media (disks, USB pen drives, tapes, CDs and so on).
In the Microsoft Windows family of operating systems EFS enables this measure, although on NTFS drives only, and does so using a combination of public key cryptography and symmetric key cryptography to make decrypting the files extremely difficult without the correct key.
However, the cryptography keys for EFS are in practice protected by the user account password, and are therefore susceptible to most password attacks. In other words, the encryption of a file is only as strong as the password to unlock the decryption key.