If you've got a few files on your computer that you want to hide from the kids, we recommend you check out My Lockbox. It's easy to use, and the chances of locking yourself out of your PC are slim. But if you're looking for something a bit more powerful, say for protecting top secret government documents on your laptop, no freeware application beats TrueCrypt (although we seriously hope that the government has their own encryption software).
TrueCrypt 5 was released today, with a slew of new features, including:
A Mac OS X version
Graphical user interface for Linux version
Ability to encrypt system partitions so that you can only boot Windows or access files with a password
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