It appears that Windows 7 takes a different approach than Vista to sharing user's profile folders: In Vista, when I shared the Public profile using the Network and Sharing Center, it created a share called "Public" (if I remember correctly). In Windows 7, the "User" folder is shared instead, and the rest is taken care of by NTFS permissions.
I like this approach. Still, I noticed one side-effect when activating password-free public folder sharing: Since Users\Default is readable by everyone, it is also accessible remotely (as a hidden folder). Now, I don't think this is a security risk, since it's read-only access, but it still appears strange to me. Is this really by design?
Disclaimer against people who just skim over the question and start answering immediately: Don't tell me how to manually share folders, how to set share and/or NTFS permissions, how to use the homegroup feature, or that it's dangerous to turn off Password Protected Sharing. I know all of that. This is not the question! :-)
: Network and Sharing Center/Choose Homegroup and Sharing Options/Change advanced sharing settings. Turn on Public folder sharing and turn off Password protected sharing.