I know this is an older post, but I had to say something about this passage, since it can easily be incorrect if it is not fully understood.
sandeepantony said: Like
I said encrypting web.config was meant for system admin or anyone who
has access to the folders on you server from opening the web.config to
read the username/password and connect to the DB and mess
with it.
First a system admin, often has access to the server directly, and this will not prevent him or her from easily decrypting the web.config file. Obviously, if the system admin, or other user has access to the files on the server, they can, as mentioned above, put in a simple aspx file that would show the decrypted value (although, they would have to figure out the connectionString name, but that's not too difficult for someone with the right skills). If the system itself has privileges to write to the asp.net folder where web.config resides (I highly recommend against this in most scenarios), then a script could be put in that would programmatically decrypt the entire web.config file and not just its individual values. So, in that scenario, it's not necessarily secure.
In a way, it's just like putting locks on your doors won't keep out a determined thief. Most thieves could pick a lock in a few seconds, and those that don't could easily use a glass cutter or baseball bat to get in through your windows or sliding glass door. The main reason we lock our doors is to keep the honest people honest by not tempting them with easy pickings. Encrypting the web.config is similar in this regard. Because it makes it more difficult to figure out what the values are, people who are basically honest, won't be tempted to take that information.
In my humble opinion, the main reason for encrypting the web.config file is as a precaution against a person who manages to gain read access to the web directory, or a copy of the web.config file (in its encrypted state). For all intents and purposes, the web.config file can only be decrypted on the server in which it resides, so a malicious hacker would have to at least have write access to the web directory, or some sort of access to the encryption key on the server in order to decrypt the file.
If you can use integrated security, that would be better (in terms of security, anyway), but if that is not an option, it is certainly a good idea to encrypt the connection strings, along with any other data sections that might contain sensitive information such as membership provider sections that require a username and password in order to check user credentials, etc.
Hopefully this will help clarify the situation