They have physical access to the device. They can enter recovery mode by holding down command r when restarting. It gives them a different copy of the os with multiple apps that you can type in (like the terminal) and would allow superuser access to whatever they wanted, however your encrypted home directory would remain encrypted and they would not be able to read it. In the olden days you would stick in a recovery cd and reboot onto that... you could also (historically and presently) stick a USB drive into the thing and boot into an os on that.... NEVER give out your password.
I thought that too, until i bought a cheap netbook that came with windows (7? Student edition? I cannot remember). I plugged in a mouse and windows said it needed to connect to the internet to download the driver for my MS optical mouse. I practically fell out of my chair laughing.
Except the mouse wouldnt work. Either the os couldnt use it, or wasnt letting me. Either way, it was funny seeing one ms product not recognize another.