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You can spend hours going through your hard drive deleting all the files and documents, but Windows only removes the shortcuts to those files which makes them invisible to users. Deleted files still reside on the hard drive, even if you empty the "Recycle bin". Almost anyone can reinstate your files.
Formatting the hard drive is a bit more secure than simply erasing the files. However, formatting a disk does not erase the data on the disk, only the address tables. It makes it more difficult to recover the files. But a fairly savvy hacker can recover most or all the files.
If you're preparing a system for retirement, you should consider complete removal of all data. Besides identity theft, data theft may leave you or your company liable under federal and state laws, with criminal penalties.
There are lots of programs that you can buy to completely erase your hard disk. (Weblinks below) But, if you're in the mood for a little hacking, or have access to a geek, you can use a utility that's already on your computer. This is "Secure Erase", a set of commands embedded in most drives built since 2001. It is disabled by most motherboard BIOSes; but you can still use it if you really want to. (Weblink below).
Some people say that there's another, simpler way. Just take out the hard-disk, and destroy it - break it with a hammer. Let whoever you're giving it to buy a new hard-drive - they're cheap enough.