If you are using Windows XP Professional edition, it comes with nifty feature called EFS (encrypting file system). Please note that, EFS is Windows XP Professional edition feature only i.e. EFS is not part of Windows XP Home edition.
Using EFS it is possible to encrypt and hide both files and folder.
How do I use EFS?
Make sure you are using NTFS partition.
Now select file or folder you would like to encrypt
Right click a file/folder > Select Properties
Click the box that read as “Encrypt contents to secure data.” > Click Ok > Click Ok
Now if other users try to open your file or folder they will get access denied error message.
This way you can protect all the sensitive information on your PC from unwanted users. Now no one can read your files :) Encryption is really nifty feature of Windows XP Professional's system.
How do I allow someone to view my encrypted files?
Windows XP allows you to add your co-worker or friend to view files. You need to provide them access over local or networked based computer.
Right Click > Select properties
Select the user you want to provides access to your encrypted files, and click OK
How do I decrypting files or folders?
Select encrypted file/folder
Click on File/Folder
Click on Advanced
Remove the check mark from the box next "Encrypt contents to secure data,"
Click OK twice.