You may have caught my inital post about the RFID tags mandated to be put in US passports starting in 2006. There's more information on the encryption, basically a PIN number that would be used as the key for decoding the data. There's still criticism though, see the article from New Scientist:
"This is a step forward. But I don't think the state department has yet demonstrated that you can use an RFID tag in an identity document and still protect the data," says Barry Steinhardt, a lawyer who deals with electronic privacy issues for the American Civil Liberties Union in New York, US.
Steinhardt thinks the government should scrap the idea of an RFID chip. He says they should include the information on an encrypted 2D barcode, which would eliminate the possibility of the information being read at a distance.
The article suggests that the proposed passport design should be given to research students at major universities to test the security of the data. I think that's an excellent idea and the process should uncover flaws that make the final design more secure. Do you think they'll do it?