I guess you still know the discussions a while ago where it was made public that notebooks can be searched without suspicion when you cross the border to the US. Actually the truth is, that this can happen everywhere as far as I understand. To be clear: I am not a lawyer, I am an engineer. However, when I discussed this with a lawyer, he explained to me that anything I carry with me when I cross a border can be searched – something we got used to, no? The notebook is just part of the “anything” in the statement above.
So, the nervousness is really about the customs officer keeping a notebook and getting access to the data, which is scary but again, is this any different to carrying paper across the border – except for the sheer volume but basically if you carry confidential documents across any country’s border the customs officer can search you and have a look at your paper.
So far so good but it seems that some customs officers took their time when they actually wanted to search a notebook – a few months until an year. They simply kept it. Now a court in the US ruled that this is illegal: Judge limits DHS laptop border searches
So, while the search at entry is still acceptable due to the points I made above, the confiscation of a computer for a longer period of time seems to be illegal. Will be interesting to see how this will develop.
Does this mean that if it's encrypted I have to decrypt it for them?
Yes, they can make you log on (or you are not allowed to enter the country). As I said, this is not different to paper