TrueCrypt is an open-source encryption program that lets you encrypt collections of files into a TrueCrypt volume or let’s you encrypt your whole USB flash drive. You can even set it up to leave no traces or hint of TrueCrypt for some nice plausible deniability.

I currently use it to split my 4GB flash drive into a 2GB TrueCrypt volume to store my financial data, code and other stuff I don’t want other people’s mitts on and then I leave the other 2GB unencrypted for things such as videos and other files that I don’t want to have to force through TrueCrypts on the fly decrypter.

When I plugin my flash drive, TrueCrypt auto starts:

…and then asks for my password:

Then it’ll mount your TrueCrypt volume as another drive on your computer:

After that, you can use it the exact same way you would any other drive. Everything you do on this newly mounted drive (note: T is the encrypted virtual drive and H is the USB flash drive in this case) is actually run through TrueCrypt and encrypted/decrypted on-the-fly before being read from/written back to your TrueCrypt (*.tc) file.

This allows you to do some other cool things such as:

• Put all your data into a TrueCrypt volume before backing up and storing off-site. Maybe even with some batch file goodness.
• Safely use a service like Mozy so that your data won’t be super exposed when travelling over the world wide web.
• Deny any involvement when the KGB has you and your flash drive and is about to start pulling teeth.

And coincidentally I’ve done all of those…