How is it that I don't need to enter my password to decrypt my phone? I understand that my Android phone is encrypted, however I never input any password to decrypt the phone. If the key is stored in some hardware component but is automatically retrieved every time my phone boots, how is it secured?

Edit: I do have to unlock my phone, but that's after it's booted. Doesn't seem logical.

My phone clearly states its encrypted:
The data is encrypted by default, but if you don't have a pin, or code to unlock your phone, then it's obviously not secure at all.

If you set a pin, password, or pattern lock etc. then you will need to provide this when the phone boots, to decrypt the drive.