TrueCrypt is a software system for establishing and maintaining an on-the-fly-encrypted volume (data storage device). On-the-fly encryption means that data are automatically encrypted or decrypted right before they are loaded or saved, without any user intervention. No data stored on an encrypted volume can be read (decrypted) without using the correct password/keyfile(s) or correct encryption keys. Entire file system is encrypted (e.g., file names, folder names, contents of every file, free space, meta data, etc).
Files can be copied to and from a mounted TrueCrypt volume just like they are copied to/from any normal disk (for example, by simple drag-and-drop operations). Files are automatically being decrypted on-the-fly (in memory/RAM) while they are being read or copied from an encrypted TrueCrypt volume. Similarly, files that are being written or copied to the TrueCrypt volume are automatically being encrypted on-the-fly (right before they are written to the disk) in RAM. Note that this does not mean that the whole file that is to be encrypted/decrypted must be stored in RAM before it can be encrypted/decrypted. There are no extra memory (RAM) requirements for TrueCrypt.