Encrypted Magic Folders is a quite efficient shareware program to hide and encrypt files. It is shareware, but it never expires. I have myself used it on Windows 95, 98, Millenium, and 2000. It hides files by using an old bug in Microsoft software of putting a null in front of a directorys name to render it, and all its contents and sub-directories totally invisible to Windows and DOS (but not Linux :P ) The Encryption is a quite unorthodox, yet beautiful method. The following paragraph is an excerpt from the EMF Manual, it is a long, but informative read, you can skip it if you dont understand encryption in the first place.:

Quite a few people ask us how big EMF's key size is. They've learned from other encryption programs that the bigger the key the stronger the encryption. This really doesn't apply to EMF. We developed our own encryption instead of using a standard because we wanted EMF to be able to decrypt at the byte level. In this way we only need to decrypt/encrypt the data your programs require and not the entire file. In theory, because we decrypt at the byte level, the biggest key we could use would be 8 bits - which is a joke. So instead of decrypting every hunk of data using the same key, as most other encryption programs do, we developed an algorithm to vary the key based on the data's location within the file. In this way we get both security and high speed. Having said that, truth is, most encryption isn't "cracked" by breaking the algorithm, it's done by guessing the password. Brute guessing of passwords tends to level the playing field tremendously. In face there are programs out there for sale that can break passwords in hours if they're too short. Use passwords at least 10 characters in length and you should be fine. If we used an established encryption method like DES or Blowfish then your files would probably have to be fully decrypted when opened, would exist on disk as unencrypted while you're using them, and then would need to be encrypted when closed. This has multiple disadvantages. First, if your computer shuts down while you have "encrypted" files open, then those files would be unencrypted. This doesn't happen with EMF as your encrypted files are always encrypted as stored on disk. The second disadvantage is that it slows things down tremendously. As an example, let's say you retrieve your email and your email program needs to add today's message to the end of your 3MB email file. If we used a standard encryption method requiring the decryption of the file before use then the entire 3 MB file would have to be decrypted, your 300 byte message added to the end and then the entire file encrypted again. With EMF, no decryption would need to take place, and the only data needing encryption would be the 300 byte message. MUCH faster. Around 20,000 times faster in this example! Until recently EMF's algorithm hadn't been broken. That has changed. Someone doing work for the FBI has cracked our algorithm. There is however no program available to decrypt EMF files. So if you're worried about the FBI, or someone with the resources to hire encryption consultants to break your files, then you should choose another program. On the other hand if you're protecting files from anyone else then you'll find EMF's security more than adequate and it's speed and convenience amazing.

So it'll keep out your little brother, and the hacker who comes in cause you've got DSL and left your computer on all night, but it wont keep out the FBI, which is reasonable. It has another feature, Scrambling, where it dynamically scrambles all the filenames, and directory names of the directorys it is protecting after having encypted them.

Also as it says in the excerpt above, in case you didn't read it, the data on your disk is never actually unencrypted unless you tell EMF to stop protecting that directory. If not then when you wish to view data it copies the encrypted data to memory, decrpyts it there, and unloads it when your done, so in a case of power failure or another event, the data on your disk would still be encrypted and the the unencrypted copy in RAM would be gone.

I'm not going to make this writeup longer by re-explaining everything in that excerpt so on second thought, you should read it.