And to those that say 'encrypting the wallet will make no difference' do you really think that the devs are thus adding it to pander to 'noobs', but that is secretly known as a waste of time?
Encrypting the wallet will help, but it doesn't solve the problem. When the BitCoin client is running, it will have decrypted your private keys and they will likely be in the memory of your machine. If you have a virus on your machine, that virus can access memory and get your private keys. Even if the devs of BitCoin work real hard and keep your keys encrypted when in memory, at some point they have be decrypted so they can be used. They may only be in memory or machine registers for a few milliseconds, but if you have a smart enough virus, your keys (and your BTC) will be compromised.
Encryption will help when the Bitcoin client is not running and it will protect you against an attack against your backups or other offline copies of your data.
It is essential for security (and the safekeeping of your BTC) that you keep your machine virus and malware free. If you can get to your money on your machine, so can a virus.
There is lots of good advice out there on how to keep your machine virus free, but the basics are to keep your machine patched, use antivirus, and never, ever, under any circumstances, access the Internet when you are logged in with administrative, root, or any other kind of elevated privileges.
In the Windows world turn on auto updates and let them run every day. Use a current, supported version of windows (that means Windows 7, not XP.) The anti-virus software the Microsoft gives out for free is solid - there is no excuse to not have anti-virus protection. Make sure your login account is not an "administrator". Only log in as an administrator when you want to install software.
In the Linux world, make sure you apply security packages from your distribution frequently. Don't run as root.
I don't post this to taunt or scold the OP, just to provide advice to prevent it happening to others.
