...could save all their porn in their encrypted home folder and no one else could even see it (even an admin!) unless they have that users password.
Not totally true. A good admin - who knows how to use /proc to access memory directly, and the dd command - can catch you in the act. You may have things encrypted on disk, but they are unencrypted while in memory. Also, a good admin can access every keystroke you make and gain your password that way.
Basically, it's tough to unencrypt something static (on the harddrive). So you wait for the user to do the unencrypting for you and then pounce on the unencrypted data while it's in ram. Or you use keylogging or man-in-the-middle techniques to covertly steal their encryption key and then have your way with them.
You are never safe from a good admin!