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Prior to iCloud, it was necessary to explicitly encrypt iOS device backups in order to include passwords stored in the iOS Keychain. Indeed, this was an important and recommended use of encryption, which allowed easy migration from device to device without having to reenter passwords, but it us unclear whether iCloud backups behave the same way. In fact, it's difficult to tell from the layout the settings UI in iTunes whether encryption applies only to local backups, or to those iCloud backups as well (though the former seems to be the case):

iTunes 10.5 backup settings

Are iCloud backups of iOS devices encrypted by default? Do they store iOS Keychains, so that after a restore of an iOS device from an iCloud backup, all saved passwords are available there?

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I do not believe the keychain is included under the iCloud umbrella. It covers: apps, mail, contacts, photos, calendar, and reminders. Additionally, application data is backed up for supported apps (currently not many)

My guess is that the password will need to be provided when restoring an iPad iCloud backup.

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Are you sure about this? My reading was that application data is backed up for all apps, but only supported apps can share and merge data between multiple devices. – Adrian Cox Oct 17 '11 at 12:21
The issue isn't whether iCloud backs up Keychain. Unlike MobileMe Sync, it does not. The question is whether backing up an iOS device to iCloud also backs up the device's Keychain. – raxacoricofallapatorius Oct 17 '11 at 20:13

There is now a workaround of this in that iOS 7 has now provided keychain syncing from iOS to OS X. You should be able to inspect the contents of the iCloud keychain as well as back it up / restore it to another device by backing up your Mac or just enabling keychain sync on your new (erased) device once restoring the normal backup.

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No. Apple says:

iCloud Keychain items are not part of iCloud Backup.

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