Ideally, encrypted data is indistinguishable from random data, otherwise known as "noise". Sensor data, radio telescope data and so forth often contain lots of that: it's just a LARGE file of bits that seem uncorrelated. No one can prove that a multi-gigabyte file of recorded data contains that, as opposed to them having renamed super-secret.tar.gz to sensor-logs.tar.gz.
Since no one can tell the difference, there's a pretty reasonable fear that police could see data related to your hobby (dumping ROMs, analyzing data, etc) and say, "You need to decrypt this so that we can see that it doesn't have $(illegal stuff) in it".
Probable cause. If there's no evidence of any kind that the data is actually encrypted data vs random sensor data then there is no way for this law to be invoked.
Specifically there has to be evidence that the data had a prior 'intelligible form' before encryption, in the case of a file of white noise there can be no such evidence.
