How do I erase an encrypted TimeMachine drive on Mountain Lion if I've forgotten the password?
Just found the answer here. Basically, from the terminal, type:

sudo diskutil cs list


You'll get a list of your drives and a bunch of related info. Look for the one you want to format and grab its Logical Volume Group's UUID. It should look something like this:

Logical Volume Group XXXXXXXX-XXXX-XXXX-XXXX-XXXXXXXXXXXX


Then erase the drive by executing the command:

sudo diskutil cs delete XXXXXXXX-XXXX-XXXX-XXXX-XXXXXXXXXXXX


Now you should be able to see the drive and format it using Disk Utility.