As others have stated, it is because of lazy evaluation. The handle is half-closed after this operation, and will be closed automatically when all data is read. Both hGetContents and readFile are lazy in this way. In cases where you're having issues with handles being kept open, typically you just force the read. Here's the easy way:
import Control.Parallel.Strategies (rnf)
-- rnf means "reduce to normal form"
main = do inFile <- openFile "foo"
contents <- hGetContents inFile
rnf contents `seq` hClose contents -- force the whole file to be read, then close
putStr contents
These days, however, nobody is using strings for file I/O anymore. The new way is to use Data.ByteString (available on hackage), and Data.ByteString.Lazy when you want lazy reads.
import qualified Data.ByteString as Str
main = do contents <- Str.readFile "foo"
-- readFile is strict, so the the entire string is read here
Str.putStr contents
ByteStrings are the way to go for big strings (like file contents). They are much faster and more memory efficient than String (= [Char]).
Notes:
I imported rnf from Control.Parallel.Strategies only for convenience. You could write something like it yourself pretty easily:
forceList [] = []
forceList (x:xs) = forceList xs `seq` (x:xs)
This just forces a traversal of the spine (not the values) of the list, which would have the effect of reading the whole file.
Lazy I/O is becoming considered evil by experts; I recommend using strict bytestrings for most of file I/O for the time being. There are a few solutions in the oven which attempt to bring back composable incremental reads, the most promising of which is called "Iteratee" by Oleg.