As I discussed last month, Apple is currently embroiled in a legal battle with the FBI over the latter's demand that it help unlock the iPhone previously used by one of the San Bernardino shooters. From various information that has surfaced related to that case, however, it is clear that Apple did release to law enforcement information from the shooter's device that had been backed up to Apple's iCloud service.
For Android users and others who may be unfamiliar with iCloud, it is a service provided by Apple that allows people to synchronize their data which may be located across multiple Apple devices and the cloud. For example, iCloud allows people using their Mac computers to have access to the photos taken on their iPhones without the need to manually copy or move files. By creating and maintaining a cloud-based copy of data as well, iCloud also functions as a mechanism to automatically back up data in case a device fails or is stolen.
In light of the recent government demands for access to data, it appears that Apple has, in an effort to better protect its customers, begun to explore ways to make data stored in iCloud inaccessible to itself even as it runs the iCloud service. Such a scenario would protect Apple's customers from government demands; if Apple cannot access a person's data, it obviously cannot give the data to law enforcement. But protecting iCloud data in such a fashion is not a simple task.
Apple clearly does not want to create a situation in which a legitimate user who forgets his or her password permanently loses all of his or her data. Maintaining a mechanism of allowing itself to restore access to people's data in such a scenario, however, exposes Apple to potential government demands that Apple provide it with access to data in exactly the same fashion.
Furthermore, unlike the case vis-a-vis data on iPhones, it is not simple to create for a particular user's server-based data a wipe capability that triggers after some number of incorrect password attempts; the data sits on servers with other people's data on it, and physical hard drives and solid state drives can be removed from machines running iCloud and their contents copied. Without a wipe-after-x-failed-attempts capability, even if data is stored in an encrypted format, governments that demand access to the data and obtain it could potentially subject the encrypted data (or, more likely, the passwords used to encrypt it) to brute force and social engineering cracking techniques. To reduce the likelihood of this occurring, stronger authentication could be used, or more complex passwords could be required - but those adversely impact user convenience.
On that note, it is important to realize that an additional challenge facing Apple is that the firm is famous for offering simple-to-use technology; anything that makes its offerings more complex or difficult to use would undermine one of its key value propositions and its brand image. It's not hard to see how making iCloud more secure might do exactly that. iCloud users, many of whom understand the implications of doing so, have been trading security for convenience for quite some time - will they truly be happy with a change?
Interestingly, Apple may achieve another goal by beefing up iCloud security: better preventing unauthorized parties from seeing private materials. The front-page-news celebrity nude-photos scandal of 2014 dubbed "The Fappening" was believed to have originated via hackers obtaining iCloud passwords via phishing. In fact, this week a hacker by the name of Ryan Collins plead guilty to having stolen data from at least 50 iCloud accounts including at least 18 belonging to "celebrities" through phishing attacks in which he sent emails impersonating Apple and asked users to login using their credentials (which they did - on his server). Two-step verification from Apple can certainly help reduce the likelihood of a phishing attack leading to data leaks, but other security approaches may improve security even further. While iCloud data is already encrypted, Apple has the keys; strong encryption implemented in a way that Apple could not decrypt data would reduce the likelihood of a data leak in the event that Apple and iCloud were ever hacked.