Security
Some encryption schemes can be proven secure on the basis of the presumed difficulty of a mathematical problem, such as factoring the product of two large primes or computing discrete logarithms. Note that "secure" here has a precise mathematical meaning, and there are multiple different (meaningful) definitions of what it means for an encryption scheme to be "secure". The "right" definition depends on the context in which the scheme will be deployed.
The most obvious application of a public key encryption system is confidentiality - a message that a sender encrypts using the recipient's public key can be decrypted only by the recipient's paired private key. This assumes, of course, that no flaw is discovered in the basic algorithm used.
Another type of application in public-key cryptography is that of digital signature schemes. Digital signature schemes can be used for sender authentication and non-repudiation. In such a scheme, a user who wants to send a message computes a digital signature for this message, and then sends this digital signature (together with the message) to the intended receiver. Digital signature schemes have the property that signatures can be computed only with the knowledge of the correct private key. To verify that a message has been signed by a user and has not been modified, the receiver needs to know only the corresponding public key. In some cases (e.g. RSA), there exist digital signature schemes with many similarities to encryption schemes. In other cases (e.g. DSA), the algorithm does not resemble any encryption scheme.
To achieve both authentication and confidentiality, the sender can first sign the message using his private key and then encrypt both the message and the signature using the recipient's public key.
These characteristics can be used to construct many other (sometimes surprising) cryptographic protocols and applications, such as digital cash, password-authenticated key agreement, multi-party key agreement, time-stamping services, non-repudiation protocols, etc.
Read more about this topic: Public-key Cryptography
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