As with a lot of hard cases, the defendant in this case isn't especially sympathetic -- he's someone convicted of a child pornography charge. That said, let's step back for a second, especially in light of the fact that
The court didn't say that police had unearthed any encrypted files or how it would view the use of standard software like OS X's FileVault.
In other words, the the mere presence of encryption software -- in this instance PGP -- on a defendant's computer can be evidence of criminal intent. Wow.
As Declan McCullagh mentioned, Mac OS X includes "FileVault," an encryption utility. Microsoft Windows 2000 and XP allow you to encrypt files. Various Linux distributions, such as SUSE, support CryptoFS. And of course there is a plethora of third-party encryption utilities like PGP and GNUPG. Now a court has said that having any one of these programs loaded on your computer can be used as evidence against you in a court of law.
How does this square with the Fourth Amendment right to be "secure in [one's] ... papers, and effects .." Or the Fifth Amendment's proscription against being compelled to bearing witness against oneself?
This court's line of reasoning can easily lead elsewhere. I wonder what other items the court might look at as evidence of intent. It's not too much of a stretch to see it used as another way to undermine the Second Amendment.
As Jerry Pournelle has commented, "But we were born free."