TrueCrypt: Virtual-Disk Encryption
TrueCrypt is one of those applications that no one has heard about, but everyone needs. If you have sensitive documents that you keep on your computer, like tax returns, confidential client data or a file with all of your passwords in it, you need TrueCrypt to protect that data in case of theft.
How It Works
TrueCrypt is a way to create a strongly encrypted virtual file system. With TrueCrypt, you create a new TrueCrypt volume, which is just a file that you save on your computer. You could think of it as kind of like a zip file; it's a file that holds other files. You then use TrueCrypt to mount the TrueCrypt volume. The volume displays as a regular hard drive to your computer. On Windows, it'll just be another G: or H: drive and under the Mac, it'll show up as a hard drive, just like a USB key would. You can then copy files to it, edit files on it, or delete files from it. When you unmount the drive through TrueCrypt, everything gets encrypted and stored in your TrueCrypt file. And TrueCrypt is protected by strong encryption, so if someone gets their hands on your TrueCrypt file, they won't be able to do anything with it without the password.
Cost
The best part is that it's all free. TrueCrypt is an open source project that is constantly being upgraded and made stronger. They are now at version 6.1 and it has gotten reviewed by security experts every step during it's creation. There's also a full list of precautions you can take to protect yourself better.
Uses
TrueCrypt is one of those applications that I think everyone could be using to increase the security of their data. As I said above, I use it to store tax returns, my passwords file and quite a few other financial documents that I don't want getting out if my computer is stolen. I also use it as a way to keep documents on Dropbox that I want encrypted. It's so easy to create a volume and store things in it that, even if what I'm storing isn't super secret information, I can still protect it with a minimum of effort.
There are actually a few other ways to use TrueCrypt, including full disk encryption and USB key encryption. I won't go into those here, but you can read about them on the TrueCrypt website if you're interested.
Installation
It's very easy to install, but the steps to create a volume are a little involved. Download TrueCrypt and then have a look at this document to see how to create a volume with it. I would recommend using AES-256 encryption, the same level of encryption used for Top Secret US documents.
If you have sensitive documents on your computer or, worse, your easy-to-steal laptop, put them in a TrueCrypt volume today. You really don't want that stuff getting out.
Just remember the password.