How should I protect my files (encryption)

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I need to encrypt the files on my laptop not againsts the government or anything just in case someone should steal it, I don't want your average thief going through my things.

It's a laptop with one SATA drive, two partitions, everything on the D drive needs protecting. I'm using Vista Home Premium.

I thought it was just right clicking a folder and choosing "encrypt contents" but that option appears to be greyed out. I also remember getting around that method once by backing up the folder and then restoring it with encryption, does that still work?

Your advice please?

I've also turned on the bios password, but I guess that's easy enough to get around too.
 
Full disk encryption ( The best method. Practically leakproof.)
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1. Bitlocker. ( only available on Vista Ultimate / Enterprise )

2. Dm-crypt with LUKS is what I use. It's for Linux, though. ( Unless you want to run Windows inside a virtual machine on Linux )

EDIT: 3. TrueCrypt. Version 5 added FDE.



On-The-Fly-Encryption ( Leaks are possible. )
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1. TrueCrypt. This one is ok, but be aware that the OS can retain copies of your files and other clues outside the encrypted container. e.g. A word processing app can save a back up of documents.
 
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On-The-Fly-Encryption ( Leaks are possible. )
-------------------------------------------

1. TrueCrypt. This one is ok, but be aware that the OS can retain copies of your files and other clues outside the encrypted container. e.g. A word processing app can save a back up of documents.

Truecrypt is full disk encryption software.

* Creates a virtual encrypted disk within a file and mounts it as a real disk.

* Encrypts an entire partition or storage device such as USB flash drive or hard drive.

* Encrypts a partition or drive where Windows is installed (pre-boot authentication).

* 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.

Further information regarding features of the software may be found in the documentation.
 
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