[socillion]

The OS has absolutely no knowledge of the hidden partition - as far as it knows, that area is just empty space on the disk. TrueCrypt runs from a bootloader (which you can have on a separate CD!), prompting you for a password. It uses that password to attempt to decrypt the (encrypted) volume headers - note the rest of the disk is encrypted too. Unless you install TrueCrypt the software application, there is no indication that was the tool you used.

Take a look at http://www.truecrypt.org/docs/ - it is an interesting read.

[JonnieCache]

The point is that the hidden partition is marked as free space on the disk, and the free space is filled with statistically random noise. Some portion of it will be the encrypted hidden partition, which is also statistically random. It is mathematically impossible to prove that any of that random data is actually an encrypted hidden disk. The only way to open it is to use the correct key, which is indistinguishable from the other key which simply unlocks the normal, clean partition, which is also encrypted.

When the police demand the key from you, you give them the one that unlocks the clean partition. Now, at this point it doesn't matter if they don't believe you, it doesn't matter if they know all about truecrypt and hidden partitions, there is no way for them to prove in a court of law or otherwise that there is a hidden partition there. You can just keep telling them "I gave you the password! I just wipe my free space with noise every night! It's just noise!" and you have plausible deniability.

As far as I'm aware this is only in theory. I'm not aware of any case of this actually being tested in court. But mathematically, it is apparently sound.