By default, there is no encryption on the Bitcoin-Qt/bitcoind wallet. So simply having "read" access to that wallet.dat file will provide the "unauthorized" user with the ability to spend any funds in the wallet. For this reason, most people will encrypt the wallet with the client's passphrase encryption feature.Applications that communicate with the Bitcoin-Qt/bitcoind client do so using an RPC API call. But if the wallet is encrypted then those applications will need to first issue a command to unlock the wallet so that subsequent commands will be processed. While the wallet is unlocked, a new connection that spends the funds can be made without requiring a password.So those are examples of how the funds can be spent from software running from that system without even knowing the password.Proper IT security practices become mandatory then. This includes protecting physical security. In the Silk Road instance it is reported that the server(s) were hosted outside the country. So the server might not have been protected against an "attacker" having physical access to the hardware.Additionally, it is possible for the system to be compromised (e.g., with malware that logs keystrokes) and the attacker learns the passphrase used for decrypting the Bitcoin-Qt/bitcoind wallet.There are other clients with different attack vectors, but most Bitcoin-based services use one of Bitcoin-QT/bitcoind, BitcoinJ, or Bits Of Proof.Now if there are funds held at exchanges or with hosted (shared) E-Wallet services, then the authorities can confiscate those funds just as it would with a bank account -- by getting a court order and serving the E-Wallet operator with the order and the demand for the funds to be directed. It is unclear from the indictment () which describes the Silk Road/DPR forfeiture what methods were employed by the authorities.[Update: Thanks to Jerry Brito, the seizure order clearly states how the wallet files (with the private keys) from Silk Road's servers were being copied (and spent, and monitored for subsequent incoming funds which would be spent to an escrow wallet.)]