Anything you do over an unencrypted wireless can be read in plain text by anyone sitting nearby with the right software(wireshark). So if all of your traffic is encrypted through a VPN then people can still see your traffic, but they won't have any idea what's in it unless they can decrypt the information inside the packets.
I don't know how Hotspot Shield works, but whenever I'm forced to use an open wireless connection I always SSH into my home network and tunnel everything through SSH which in effect encrypts my traffic so nobody can read it.