TrueCrypt

TrueCrypt allows you to create and mount encrypted disk volumes such that your data is encrypted/decrypted on-the-fly as it is read/written. The volume can be mounted from a single file rather than an entire partition. You can select the encryption algorithm used and also use a keyfile instead of a regular password.

Isn't a Windows password enough protection?
No. Someone could boot your machine using a USB or other drive and access your files.

What about "Encrypt contents to secure data"?
I have no idea how that works.

What about BitLocker on Vista?
Sounds good, but you shouldn't be using Vista yet.

Other advantages?
TrueCrypt can encrypt the boot drive. A TrueCrypt volume stored in a single file can easily be moved around, backed up, zipped, deleted and so on...