Strictly speaking it should be impossible for any PDF Reader to display encrypted PDF Documents since they are encryped. But thats not the case – so how is that possible?
Basically when encrypting a PDF Document with a password the encryption key is generated as explained in the PDF specification. This key is then encrypted with the user specified password.
Like that the PDF Reader can decrypt and display the document with the encryption key and without having to know the password.
Now what happens if you loose the PDF Password? Pretty easiy. The Aloaha PDF Editor (included in the Aloaha PDF Suite) allows the user to set or remove the permission password. Aloaha just decrypts the document with the decryption key and then re-crypts the key with with the new permission password.
This shows that the only way to secure PDF Documents is to encrypt them with certificates (for example with the Aloaha PDF Crypter) and NOT just with passwords!
NEW: The new Aloaha PDF Reader is also capable of removing unknown PDF encryption passwords. Just open the document with the Aloaha PDF Viewer and then save as decrypted!
More details on: http://blog.aloaha.com/2012/05/03/aloaha-releases-one-of-the-worlds-smallest-portable-pdf-viewer/