Are you concerned about the confidentiality of your files? Take a look at TrueCrypt, a great tool to create encrypted volumes.
TrueCrypt is free open-source disk encryption software which allows you to create virtual encrypted disks in a file container or simply an entire physical device. Supporting various encryption algorithms, TrueCrypt can easily defend its place among commercial encryption software. Another nice to know is the fact that TrueCrypt doesn't require any installation at all, which makes it very nice to take along on portable devices.
As a small experiment, I decided to encrypt a spare USB stick I had lying around, on a partition level. I started by downloading the plausible deniability of TrueCrypt and started the wizard to create a new volume. I selected a standard volume as a test. If you want to have <a href="http://www.truecrypt.org/docs/?s=plausible-deniability "TrueCrypt Plausible Deniability"), TrueCrypt allows you to create hidden volumes as well.
I chose to encrypt my USB stick on a partition level, making the entire stick unusable in case of loss. You could argue it would be less suspicious to carry around a normal looking USB stick with a TrueCrypt file-based volume stored on it, with a hidden volume inside of it. And I'd agree if I'd be serious about the sensitivity of the data I'd be carrying around, but for now, I wanted to play around with it on disk level :)
After going trough all choices and generating some random data, TrueCrypt formats the partition to make it look like a normal FAT partition, filled with random data on a low level.
When the wizard is finished, it's possible to mount the new volume to any free drive letter, after providing the password. From then on data will be encrypted and decrypted on the fly.
Out of curiosity, I booted with my Ultimate Boot CD and had a look at the hard disk with PTS Disk Editor. The encrypted drive was filled with data from start till end, without any definable pieces.
Comparing this to my normal hard disk, I noticed several big empty gaps, repetitive blocks and even readable pieces.
I'm very impressed by TrueCrypt, and it's definitely something I'll be keeping around in my tools archive just in case.