Software: TrueCrypt (Free Disk Encryption Software)

Windows XP (Professional edition) and Vista (Enterprise and Ultimate edition) comes with a built-in file encryption technology called EFS (Encrypted File System). This technology automatically encrypts or decrypts a file when its saved or opened.

Windows Vista (Enterprise and Ultimate editions) also supports a new feature called BitLocker which can encrypt a whole disk. Although its worth noting that BitLocker can only encrypt the system volume, and cant encrypt auxiliary volumes or removable drives.

Note: These features require your hard drive to be formated with the NTFS file system.

If you're using a version of Windows that doesn't support EFS or BitLocker encryption technologies or if you want to encrypt auxiliary volumes or removable drives. TrueCrypt is a free open-source real-time automatic encryption Windows and Linux. TrueCrypt allows you to create encrypted volumes either from an entire physical drive or partition, or by turning a regular on-disk file into an encrypted virtual disk.

Main features:

• Creates an encrypted virtual disk within a file and allows you to mounts it as a real disk.
• Can encrypt an entire hard disk partition or a device (such as USB flash drive).
• Support Encryption algorithms: AES-256, Blowfish (448-bit key), CAST5, Serpent, Triple DES, and Twofish.
• Keyfiles supoort, which allows you to specify a file (such as a: text file, mp3, bmp, etc.) that is combined with your password to decrypt your information.