iPhone 4 email encryption
The article cited in your question is from before iOS 4 started using "Data Protection, which is Apple's term for creating an encryption key based on the users lock code or password. Basically the hardware encryption is used, but only accessable after a user has created an encryption key (which is based on the entered Passcode), and as soon as the phone is locked or turned off, the key is erased.

The problem is that apps are only going to encrypt data if they utilize the Data Protection API, which the Mail app does: http://support.apple.com/kb/HT4175

It's also what setup the groundwork for the remote wipe feature, which destroys the Key as well. source