A+: Encrypting and compressing files in NTFS
Encryption and compression are available since Windows 2000 and later on drives formatted with the NTFS file system. To set these options for a file or folder in Windows, you can use Windows Explorer or the command-line programs Compact (to compress a file) or Cipher (to encrypt a file).
To select or deselect the archive attribute, or to set encryption or compression options on a drive using the NTFS file system, click the Advanced button underneath Properties in Windows Explorer. Select Compression to reduce the disk space used by the file, or Encryption to restrict access to only the system’s administrator or the user who encrypted the file. Files can be compressed or encrypted, but not both.
If you are encrypting the file, Windows recommends that you encrypt the folder containing the file (which will also encrypt the file).
Only the user who originally encrypted the file (or the system’s Administrator) can open an encrypted file and view its contents. Only the Administrator can apply compression to a file or folder.
If you need to encrypt an entire drive, Bitllocker is included in Enterprise and Ultimate versions of Windows since Vista, and open source utilities like TrueCrypt offer more advanced and diverse features.