here is a link to a fantastic essay on the security pitfalls in cryptography:
http://www.counterpane.com/pitfalls.html

here's a selected quote:
Strong cryptography is very powerful when it is done right, but it is not a panacea. Focusing on the cryptographic algorithms while ignoring other aspects of security is like defending your house not by building a fence around it, but by putting an immense stake into the ground and hoping that the adversary runs right into it. Smart attackers will just go around the algorithms.
enjoy.