File Encryption is not available on XP/Home or Vista/Home but requires /Pro or better.
Actually, YOU SHOULD NOT USE Win/Encryption (
see this)
Privacy:
First, all users should be Limited Accounts. Use the Admin account only for applying
MS updates and installing software.
Second, make all User data Private; this stops UserA from exploring the My Documents belonging to UserB.
Thrid, if you're on a laptop and have sensitive data on it (eg banking accounts, ssn)
and you want to protect that data in the case that the laptop is stolen or lost,
then use an OEM PGP product to encrypt the file(s). Personally, I use
Fileassurity OpenPGP which works very well.
Lastly, XP and Vista have ACL (access control list) support.
google for CACLS and XCACLS