Question:

What is the difference between "Protected" storage and "Folder" storage?

 

Answer:

"Protected" storage is where temporary files are created as encrypted.

"Folder" storage is where temporary files are created as un-encrypted.


See this Microsoft Developer Network article for reference.

 

Note:

If whole disk encryption is already in use, then additional encryption may be disallowed by the encryption technology that is in use at the disk-level. In that situation, use "Folder" storage.