MySQL data encryption - why, how and other details

Hi, I've seen various aspects of this question addressed in other posts but rather then those other users, like me, interested in an overview having to put bits and pieces together into a concise discussion I thought I'd ask a question.

Overall questions:
1. when is it appropriate to encrypt the actual values within a MySQL database
- generally
and
- assuming the server is highly secure is this really necessary
 * by highly secure I mean that a small number of 'highly' trusted individuals will only ever have access to file system
2. should you look to, if necessary, only encrypt those column(s) necessary as encryption could inflict un-necessary load on resources if over done
- what is the impact of data encryption on performance, is there a rule of thumb
- should this be a consideration
- if individual column encryption makes sense then how to?
3. If I understand correctly the encryption process is that the data on disk is encrypted (value in the DB table cell) and when decrypted is stored in memory, is this correct and are there other 'ways' this may work.
4. it occurs to me that the 'key' to be used in decrypting must be 'somewhere' and because in technology somewhere is often elusive it seems that 'options' would exist: user making the query (from the application) must have it, the key is stored on the system but obscured from the casual thief (if such a thing exists on a well secured file system) and other?
- What are the options here: What software, What technologies?

I'm appreciative that this question is actually requesting a sh*$ load of information so I've appropriately scored it, furthermore I'm hopeful it won't take the likes of Mr. Schneier to address.

Cheers

If it makes any difference the platform I'm dealing with is working within Apache, Tomcat and JAVA.