Closed-source software is delivered in files other than plain text (e.g., binaries). Windows is one example of a closed-source operating system. Open-source software can be audited and re-audited by developers and users to prevent “back doors” and the like (examples, Linux, *BSD systems). A couple of the *BSD systems’ kernels are isolated, in ways, from user software, lending to even more security and stability. Encryption can be used in operating systems, user software and communications for increased security.
So basically you’re saying that if you use Windows, Windows can secretly do whatever they darn well please on your computer (more or less)?