The latest iteration of this handy tool is now out (Feb 5, ’08). The new version now provides for full disk encryption.
From TrueCrypt:
Main Features:
* Creates a virtual encrypted disk within a file and mounts it as a real disk.
* Encrypts an entire hard disk partition or a storage device such as USB flash drive.
* Encryption is automatic, real-time (on-the-fly) and transparent.
* Provides two levels of plausible deniability, in case an adversary forces you to reveal the password:
1) Hidden volume (steganography – more information may be found here).
2) No TrueCrypt volume can be identified (volumes cannot be distinguished from random data).* Encryption algorithms: AES-256, Serpent, and Twofish. Mode of operation: XTS.
[tags]TrueCrypt, Disk Encryption, Encryption[/tags]