Q:

Masking encrypted files

If I encrypt a file with TrueCrypt, the presence of the TrueCrypt exe is evidence that I have encryption on the computer. Even if the executable is in a portable drive, that someone could find it gives away that I've encrypted something. With that being said, is there a way to encrypt a file, but somehow not leave any tell-tale signs of encryption?

A:

As long as you need to decrypt your files to access them, I'm not sure how you could hide the fact that encryption/decryption takes place on the machine.
If you're trying to protect yourself in the event that you're forced to give up your password, there is something you can do with TrueCrypt. Create a hidden volume. This essentially sets up a TrueCrypt volume embedded inside another TrueCryt volume. 
The inner volume holds the data you're trying to protect, and you encrypt it using a secure password that you alone know.
The outer volume serves as a sort of "honey pot". You put files in there that LOOK like you'd want to protect them, but aren't actually sensitive. If under duress, you can give up the outer password (different from the one for the inner volume) and whoever's asking you for the password will see the insensitive data.
Since TC volumes always occupy a fixed amount of disk space, you can deny the existence of the embedded volume. TC provides a nice interface for this. From the outside it's very transparent. Give the password for the inner volume, you get its data. Give the password for the outer volume and you only get its data.
You can read more about using this feature of TrueCrypt at:
http://www.truecrypt.org/hiddenvolume

A:

What you are looking for is deniable encryption, where the encrypted files are "hidden" in such a way that cannot be identified easily as encrypted files.
The wikipedia link provides examples of software that can do this on various platforms.

