I don't encrypt my laptop's hard drive. Most of the files on my laptop are mundane: Photos, music, some documents. Everything on my laptop is important enough to back up, but not important enough that I'd care if they were published on the Internet, far and wide, much less if some attacker happened to get access to them. I don't store my passwords in my web browser, I don't click the "remember me" checkboxes when logging in to web sites. There really is nothing on my hard drive worth fretting over, and I go through great pains to keep it that way.
For stuff I consider sensitive -- medical documents, password lists, financials and the like, I store on a truecrypt partition of the external drive that I use for backups. Since I use OS X most often, this drive is a Time Machine drive, but with a chunk of space partitioned off for TrueCrypt. I opted to use a partition because it's less obvious than a container on the filesystem. I use TC's deniable filesystem trick as well, and padded the "duress volume" with things like "hacking" documents that might be plausible.
I also have an old 80GB laptop hard drive, which is fully-encrypted with a truecrypt volume, which I occasionally back up to from my primary TC volume. This drive is stored in a secure location off-site, in the hands of a trusted individual. They do not, however, have the passphrase to the volume.
The goal in all of this is so that I don't carry sensitive data with me. None of the encrypted stuff is anything I could possibly need RIGHT THIS SECOND. This means that my sensitive information is only at risk of being exposed when I'm at home and when I actually am accessing it.