TrueCrypt is a powerful, flexible and highly-effective program that uses "volumes" to contain encrypted data. These volumes are mounted as a system drive to read, change or add encrypted content to them on the fly -- you can encrypt files, folders, external drives or even the entire partition on which Windows itself is installed, requiring pre-boot authorization in order for the operating system to run.
It supports a variety of encryption algorithms, including AES-256, Blowfish (448-bit key), CAST5, Serpent, Triple DES, and Twofish. The latest version adds support for multiple processors, which provides a boost in the encryption/decryption speed equal to the number of processor cores in use, and "backup headers" which provide last-chance recovery for encrypted drives and files that get damaged.
Though its interface may not be very intuitive, the tips in the extensive help manual and volume-creation wizard provide good guidance. TrueCrypt is an open-source, cross-platform (Windows, Mac OS X, and Linux) project and completely free to use, but the author accepts and encourages donations towards further development.
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