There are a number of commercial programs that will create an "encypted disk" in a file on your hard drive that you can use like a regular disk drive, except that the files are automatically encypted as they are store to this virtual disk drive. Most are not inexpensive. TrueCrypt is a free, open source alternative to these programs. It has more features than most of them. From the TrueCrypt web site:
* Creates a virtual encrypted disk within a file and mounts it as a real disk.
* Encrypts an entire hard disk partition or a device, such as USB flash drive.
* Encryption is automatic, real-time (on-the-fly) and transparent.
* Provides two levels of plausible deniability, in case an adversary forces you to reveal the password:
1) Hidden volume (steganography -- see more info here).
2) No TrueCrypt volume can be identified (volumes cannot be distinguished from random data).
* Encryption algorithms: AES-256, Blowfish (448-bit key), CAST5, Serpent, Triple DES, and Twofish. Mode of operation: LRW (CBC supported as legacy).
* Based on Encryption for the Masses (E4M) 2.02a, conceived in 1997.
Note that I have no way to test the encryptation and security claims made for this software, but it is open source so its operation is available to the public -- and I haven't heard a chorus of experts saying the claims are false. Of course, the commercial offerings can't easily be tested either -- and no one can look at the code that makes them work.
Rating: 4 Stars (Only features rated, security claims are unrated)
Operating System: Windows 2000, XP, 2003 (also Linux)
License: Open Source
Version Reviewed: 4.1
Web Site: http://www.truecrypt.org/