For file and folder encryption, there are many tools that will do the job.  File encryption can be saved to a thumb drive, hard drive or SD Card.  One free, open-source and useful method of encrypting data is TrueCrypt.

TrueCrypt is freeware that creates a virtual encrypted disk on a file, partition or entire disk drive.  It works on Windows, OS and Linux.

What TrueCrypt does is to create an encrypted area of storage (and encrypted volume) where you can drag unencrypted data for encryption.  This is known as one-the-fly encryption (OTFE aka real time encryption).

To install TrueCrypt go to http://www.truecrypt.org/downloads

Once you Double Click the TrueCrypt icon, you will see this:

Click the “Create Volume” button for creating the encrypted volume.  This volume will allow file encryption (or folder encryption).

You will see the “TrueCrypt Volume Creation Wizard”.  Since we want file encryption and/or folder encryption, we will select “Create an encrypted file container”.  Note that TrueCrypt also allows full partition and full system drive encryption.

We will choose “Standard TrueCrypt volume” and select next on the TrueCrypt Volume Creation Wizard.

note: The TrueCrypt Volume Creation Wizard allows you to hide the data or just encrypt with a password.  With a higher need for privacy, you may need to hide the fact that there is file encryption at all so no one even questions you about why its encrypted.  If its not hidden, others will see a file that cannot be opened with any application they know of.  And even if they do know that it must be decrypted to view the contents, they must have the password.