Euroboy,
If you choose to use an on-the-fly encryption program like Drivecrypt (or Scramdisk), all your sensitive data would be kept in a special encrypted file on your hard drive that you create. When you create this file you choose how large you want it to be based on how much data you plan to store in it. This file is password protected. To use the file, you must "mount" it. All this means is that you tell the program what your passphrase is and the FILE then shows up in Windows Explorer as a new logical drive (ie: if you had only a C: drive, after mounting the encrypted file you would now have what would APPEAR to be a new drive; possibly called D:.) You can then store sensitive data in D: EXACTLY as you would on C:. You can even run programs inside D:.
When you are done working with your data, you "dismount" the D: logical drive and your sensitive data is securely encrypted inside
the single file on your C: drive that became D: when you mounted it. If you decide you no longer want the sensitive data that is in this file, you could simply delete it to the recycle bin using Windows since the remnants of it are of no use to anyone unless they have the passphrase. To be truly secure, however, I would choose to ERASE the file using Eraser. Also, you would want to use Eraser periodically to erase all unused disk space and any other files that are of concern inside Windows or your internet browser.
Hope that makes sense. If you need more info, drop me an email.
Regards,
Scott Smith