I'm pretty sure they encrypt the entire flash with a random key that is stored in the first page. When remote wipe request comes in you just need to nuke the key to destroy data, which is a lot faster than actually overwriting 32Gb of flash.

iTunes backups are not encrypted by default because you have a key management issue. The primary purpose of the backup is so that you can restore it to a different device after your main device is lost or broken. Since devices where backup is taken and restored are different you can not use built-in key to encrypt the data. There are only two options where to store the key - with the backup itself (which is entirely useless) or with the user. Which is exactly what iTunes does - it allows the user to specify a password that is used to generate the key.