I can reproduce this using a laptop with iwl4965, and a Nexus One.

In Wifi-Analyzer, it is displaying as being "WPA" with a lock icon, but
when I go into the wireless settings, it says "Open". I can definitely
connect without a password, and can access the Internet through the
adhoc network.

I agree that we should disable WPA adhoc networks in network-manager
until this is resolved in all kernel drivers.

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https://bugs.launchpad.net/bugs/905748

Title:
  Create WPA2 adhoc is Open, not encrypted

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