Indeed, when a file is encrypted, its contents are unusable until decrypted, so anything you do with the data necessarily implies that the data exists somewhere on the machine in decrypted format. It will be decrypted at least in the machine RAM, and some (many) applications may copy part of the data to temporary files (Word does that a lot, for instance). Moreover, RAM contents may be copied to the disk as part of virtual memory management, a trick by which process see more memory than really exist in the machine, the operating system using the disk for transparently storing the less used chunks of data. When using hibernation, the whole RAM contents make it to the disk.
To really keep your data confidential, even if your laptop is stolen, then you must use a comprehensive solution which encrypts just about everything on the machine. TrueCrypt is the oft-cited product for system encryption, and it supports full-system encryption.
As @Adnan points out, if the data is already on the machine, unencrypted, then it should be removed. However, applying full-disk encryption on the live system (as TrueCrypt pretends to be able to -- I have not tried !) should be sufficient. Possibility of recovering old data chunks from hard disks, after having been overwritten, is a recurrent subject on this site. If you are truly worried about it, buy a new laptop, apply full-system encryption, then transfer your data, and finally destroy the old laptop with your favourite annihilation method (burning and dissolving in acid tend to be health hazards, while throwing it overboard while in the middle of the Ocean is bad for the environment; shredding might be safer and easier). Half of the job of encryption is to alleviate the user's paranoia, so it is up to you to see how much your consider data confidentiality worth.