If targetting iOS 4, you can use the Data Protection APIs.
If you have \'Full\' protection, does this encrypt the entire sandbox?
Specifically, If I download
If I recall correctly, starting with iPhone 3GS, hardware encryption is on by default for data on the iPhone, and additional encryption is available if you implement -- though if you are distributing/selling through AppStore, and you're implementing your own custom encryption beyond what Apple provides, the terms of AppStore requires you to get US Dept of Commerce (if my memory is correct) approval because encryption is classified as munition.
A good starting document is http://www.apple.com/iphone/business/it-center/security.html
More info on this is available within (paid) iPhone Registered Developer website which for obvious reason, I couldn't reveal, and you'll have to discover/read yourself.
Hope the information helps, and please mark the response as answered if this helps, thanks.