Compaq WL110 User Manual page 93

When you select to enable encryption and deny non-encrypted data, your Access
Point will:
Only process messages received at its wireless interface, when the messages
have been encrypted with either one of the four identified keys.
Always transmit wireless data using the selected WEP key.
Also encrypt all its multicast and broadcast traffic that it will transmit to the
wireless medium.
If your network includes wireless stations configured with a non-matching WEP
key, such stations will not be able to establish a wireless connection because
they will not be able to understand (decrypt) crucial network information.
Enable Encryption & Allow non-encrypted Data
When you select to enable encryption, but you cleared the
check box, the Access Point will:
Process all messages received at its wireless interface, regardless whether
the messages have been encrypted with one of the identified keys or not.
Encrypt wireless transmissions based on the encryption settings of the
addressed station.
If the addressed station does use WEP encryption, the Access Point will
send the message in encrypted format, using the selected transmit key value.
If the addressed station does not use WEP encryption, the Access Point will
send the message in non-encrypted format.
If the data message is a multicast or broadcast message, typically addressed
to "all stations", the Access Point will send the message in non-encrypted
format.
This behavior of the Access Point is not related to the way the wireless message
was received at the Access Point. If for example a wireless station that uses
WEP encryption wishes to send data to another station in the same wireless cell,
the data transmission will:
Go encrypted from the WEP station to the Access Point
Go un-encrypted from the Access Point to its final destination, if the
addressed station does not support WEP encryption, or does not have the
WEP option enabled.
CAUTION: For most network environments that require a higher level of
security than the standard security mechanisms supported by
11Mbps Wireless LAN and most of today's network operating
systems (e.g. user names and passwords), Compaq advises against
using this option, unless you want to provide easy access for any
client station and/or migration is more critical to your data network
than top-level security.
Good Practice Administering Encryption Keys
Like with other properties, your WEP lock is as safe as locking the door to your
house: i.e. if you don't stick to secure policies on who will be allowed to use the
deny non-encrypted data
Security 7-11