A few months back I asked a Microsoft Sales Rep what encryption was used for Vista. He did not know. The encryption algorithm implemented is AES-CBC. This is Advanced Encryption Standard in cipher block chaining mode.
AES is a block cipher developed by our government. The key sizes can be 128, 192 or 256. The block size is 128bits. It can change the plain text 10, 12, 14 rounds.
To learn more detailed information. Wikipedia has a excellent article.
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