Adding password to a compressed file or folder.
Right click on the file or folder, choose send to compressed file.
Double click on the compressed file to open.
On the menu bar click on File and then "Add a Password"
Delete original uncompressed file or folder.
http://support.microsoft.com/kb/306531
TrueCrypt (free)
http://www.download.com/TrueCrypt/3000-2092_4-10628214.html?tag=lst-0-1
http://sourceforge.net/projects/truecrypt
On-the-fly encryption software which can create a virtual encrypted disk within a file and mount it as a real disk. It can also encrypt a hard disk partition or storage device, such as USB FLASH DRIVE. Moreover, TrueCrypt supports plausible deniability.
TrueCrypt provides two levels of plausible deniability, in case an adversary forces you to reveal the password: a hidden volume (steganography- more information may be found here); no TrueCrypt volume can be identified (volumes cannot be distinguished from random data). TrueCrypt uses encryption algorithms AES-256, Blowfish (448-bit key), CAST5, Serpent, Triple DES, and Twofish. It is based on Encryption for the Masses (E4M) 2.02a, conceived in 1997.
AxCrypt 1.6.3 (free: donation optional)
http://www.filehippo.com/download_axcrypt/
http://www.axantum.com/AxCrypt/
AxCrypt File Encryption Software - Free Personal Privacy and Security for Windows 98/ME/NT/2K/XP with AES-128 File Encryption, Compression and transparent Decrypt and Open in the original application.
Since AxCrypt works on a file-by-file basis, you can safely and easily send encrypted files to other users via e-mail or any other means, you can even make self-decrypting files so the recipient does not need AxCrypt installed to decrypt.
Password protect Microsoft Office files
Open file. On the Tools menu, click Options, and click the Security tab. Choose password options listed.
Demo of how to password protect Microsoft Office files
http://office.microsoft.com/en-us/excel/HA012001751033.aspx
How do I password protect my files and folders in Windows?
http://www.computerhope.com/issues/ch000705.htm
How to make files and folders private in Windows XP so that only you have access to them
http://support.microsoft.com/kb/930987
Windows Tips: Password-Protect Your Sensitive Files and Folders
http://www.pcworld.com/article/id,110663-page,1/article.html
Keep Your Data More Secure
http://www.microsoft.com/windowsxp/using/security/data/default.mspx
Encrypt files or folders
http://www.microsoft.com/windowsxp/using/security/learnmore/encryptdata.mspx