If you refuse to decrypt your files for a government official at a border crossing, they'll make you change your mind about it very quickly.
I should have read this entire thread over again before replying to so many posts separately, but oh well.
As stated, plausible deniability is the key to this.
Basically, as far as a file goes, here's how it works...
Say you have "Rachael_gets_ass_rammed_vol3.avi" as your source file.
In TC, you will make a new PD-based encrypted "partition". You can make it any size you want (within the means of your drive of course), but let's say you make it 10 GB.
Then, for the main encryption partition, you choose "Rachel_gets_ass_rammed_vol3.avi". TC will now over-write this file (or create it if it isn't there). The file will keep the same file name, but now be 10gb in size.
Now, within that file, is your hidden volume. Let's say this is 8GB.
Your password for the outer, main volume is: myeasypass
But, your password for the 8gb hidden volume is: mysuperfuckinghard2guesspasswordthatonlyIknow!
Now, when you use TC you go to mount your shit, you find "Rachel_gets_ass_rammed_vol3.avi" on the drive, and select it. It will ask you for your password.
You unlock it with "myeasypass" and it will mount a 10gb drive. You open it, and throw in some files that look sensitive, but really aren't. Bank account info, some cock pictures, a few legit porn videos, etc.
Then you dismount it, and never put anymore files on there.
Now, you go back to mount a volume again, and once again select "Rachel_gets_ass_rammed_vol3.avi".
This time, when it asks for the pass, you use "mysuperfuckinghard2guesspasswordthatonlyIknow" and viola! It mounts the hidden 8gb drive.
Now you store your REAL sensitive/private shit within that.
Now, when all is said and done, you have 1 encrypted file that is hard to find.
When found (by the Customs Agents in this case), they could beat you and threaten you until you open it. You give in. You open it with "myeasypass" and they see your cock pics and bank info and a little porn and let you go.
They won't know the hidden volume is there because it's invisible, it isn't a "file" and the outer volume shows that it has 8gb of free space.
See how it works now?
I know this is a shitty explanation, but fuck it, hopefully it makes sense.
Also, you can do the same thing with Windows.
You can create a "main" windows and a "hidden" windows. You would use the "main" copy when you boot, use it, store some files on it, make it look used.
Then, you would use your "hidden" copy for your daily activities.
If you are ever forced to boot your computer, you enter the pass that unlocks the "main" windows, and you are good to go.