If you encrypt an iPhone backup in iTunes and then forget your password, you will not be able to restore from backup and your data will be unrecoverable. If you forget the password, you can continue to back up and use the device, however you will not be able to restore the encrypted backup to any device without the password. You do not need to enter the password for your backup each time you back up or sync.
If you cannot remember the password and want to start again, you can use a SmartKey iTunes Backup Password Recovery from http://goo.gl/5oZjt to unlock iTunes backup password of your iPhone at first.
You can reset your passcode by turning off your iPhone, press and hold the power button for a few second until the phone powers then connect it to the computer you used to register the IPhone. Keep holding down the home button until you successfully connect to ITunes then select the summary tab and click restore as you follow the prompts. You can also contact the nearest IPhone dealer for further assistance.
Another trick which worked for my iPhone 4s - My phone got disabled after I tried a lot of times, after which i plugged it into my PC and connected it to iTunes. Whenever I clicked on "sync" and cancelled it, for some reason i was able to renter my passcode again. After the failed attempts, i followed the same procedure and got infinite retries to guess my passcode. Using this I could unlock my phone :)