Securing your computer from attacks and break-ins is one thing. And you need to do that, as you have already done. However, if someone DOES manage to get your data despite those security precautions, that is where encryption comes in. At that point they have your data, but they can't read it because it's encrypted.

Do most people have data that needs to be encrypted? That depends. I would personally recommend encrypting things like tax returns, financial data (e.g., your user data files from a program like "Quicken"), etc. If you have a list of username/passwords that you keep in a file on your computer then IMHO that should be encrypted too. I also feel the need for encryption is much higher for a laptop than a desktop computer. Laptops are stolen all the time. Desktops, not so much, unless they happen to be stolen alongside a bunch of other stuff in a house break-in.

If you store files on one of the online backup "cloud" services, I think that needs to be encrypted too. But not using the storage-providers encryption. This thread illustrates just how little you can trust the providers of that service. Do they have backdoors into their encryption schemes? Well, Microsoft certainly does. 'nuff said. That was my point in starting this thread. To make people aware. Encrypt your data separatedly yourself, using open source encryption, before it gets uploaded.

Personally, I like and trust Truecrypt and PGP. Somebody else already mentioned these two. They are open source, free, and well vetted.