SQL Server 2008 will have a mechanism to encrypt the database at rest, with little overhead, and you can try this in CTP5. While it is on the instance where it was encrypted it can be accessed by any application with out modification. However if it is detached/attached or restored to another instance then the key used to encrypt it will need to be available on the new instance.
How does that affect replication?
Well you don’t have to encrypt the replicated database, and that maybe OK if you are only replicating a non-sensitive part of the data. The replication agent will decrypt and encrypt data on the way in and on the way out between the two. However the recommendation is to encrypt the databases involved with a Master Key.
Finally you should be aware that the data going in and out of a database that has been encrypted is not itself encrypted, that is left to the transport layer so if that’s important to you then you will need to apply any of the common approaches for securing traffic i.e. VPN, SSL and IPSec.
For further reading check MSDN here