When I installed Ubuntu 11.04, I checked the box to encrypt my home folder. Today, I set my account to log in without a password to allow my friend to borrow it. However once you click to log in. It says that Nautilus cannot find/create a directory for /home/USERNAME/Desktop and all I get is a blank screen (default 11.04 purple background and no Unity. My keyboard shortcuts work, but nothing exists on the screen.
As you probably know it's not possible to have an encrypted home folder without a password. The login password was used to encrypt the folder, if the computer doesn't know it, it can't decipher your home folder.
As this is the whole point of an encrypted folder, you just can't have both things at the same time (encrypted folder and automatic login).
You have a couple of workarounds:
Create a new user account for your friend. Get sure that it's home folder is not encrypted and set the computer to autolog to this account. You will need to add it to the superuser group to allow him to do administrative tasks.
You can also disable encryption in your home folder, Jonik answer to this question is quite straigh forward.
If you need to disable the autologin from the command line, check this enzotib answer. If you are not able to log to the GUI, you can usually access the command line pressing CTRL+ALT+F1.
If this doesn't work boot into recovery mode and follow the enzotib guide. You can usually select recovery mode on the grub screen, the first menu that appears when booting, where you can select the OS that will be loaded. If you don't see this screen try to press shift while booting.