The contents of a file are not removed from the hard drive when the file is deleted. When a file is deleted from the Windows Recycle Bin, for example, only the pointer to the file is eliminated. The file is then invisible to the operating system, and it no longer appears in the directory tree structure. The previously occupied space on the hard drive is marked as free and can be reused by the operating system. However, until new data is written to this space, the contents of the file still exist. This data can survive indefinitely depending on how full the drive is, where the file was located physically on the drive, and how often you use your computer. There are numerous tools that can recover "deleted" files by searching for data on a hard drive that does not have any corresponding pointer information.
It is good security practice to overwrite, or wipe, sensitive files when they are deleted. But what level of erasure should you set for your confidential data? In 2004, the U.S. National Security Agency (NSA Advisory LAA-006-2004) found that
One problem with software disk-wiping is that it cannot sanitize hard drives that have actually physically failed. In such instances, you could destroy them by degaussing, melting, incineration, crushing or shredding. Physical destruction offers the highest level of erasure but even this is not necessarily absolute if any remaining disk pieces are larger than a single 512-byte record block in size. Whichever method you chose, either software wiping or physical destruction, you must enact policies and procedures governing hard drive disposal. You should also offer appropriate employee training to ensure that you have taken "reasonable measures" to safeguard your data.
The Federal Trade Commission's FACTA rule on the proper storage and disposal of certain consumer information requires that such information is properly disposed of. Although physically destroying disks is more costly than wiping them, the potential costs associated with compromised data may make it the best option. I would recommend the NIST Special Publication 800-88, Guidelines for Media Sanitization. Its recommendations can be applied to all types of organizations and are helpful in devising an appropriate erasure policy based on the confidentiality level of your information.