System encryption

System encryption provides the highest level of security and privacy, because all files, including any temporary files that Windows and applications create on the system partition (typically, without your knowledge or consent), hibernation files, swap files, etc., are always permanently encrypted (even when power supply is suddenly interrupted). Windows also records large amounts of potentially sensitive data, such as the names and locations of files you open, applications you run, etc. All such log files and registry entries are always permanently encrypted as well.
System encryption involves pre-boot authentication, which means that anyone who wants to gain access and use the encrypted system, read and write files stored on the system drive, etc., will need to enter the correct password each time before Windows boots (starts). Pre-boot authentication is handled by Boot Loader, which resides in the first track of the boot drive and on the Rescue Disk.