Disk-encryption software protects what's on your hard drive by turning it into a mass of unreadable gibberish, something even more difficult to read than the comments section on YouTube. You can use such a tool to encrypt an entire drive, or to create an encrypted file that the computer can then mount as a virtual drive. The encryption software sits between your applications and the encrypted disk, encrypting and decrypting on the fly; the applications are not aware that the information they're using is encrypted.
Usage tip: If a hacker--or, say, just a nosy coworker--acquires access to your computer when an encrypted volume is mounted and the person has the ability to see the volume as a drive, the snoop will be able to read or copy files from the volume just as they would from an unencrypted drive; they may not even know that the drive is encrypted. If the encrypted data is not mounted, however, it appears as an undifferentiated lump of random characters. The following two utilities, BestCrypt and TrueCrypt, both support options to dismount a drive automatically after a user-defined period of inactivity.
Jetico's BestCrypt ($60, free trial) is a commercial encryption package. In its basic form, it offers only container-based encryption; full-disk encryption costs more. BestCrypt contains tools to organize your containers into groups, so you might have many small containers with different passcodes, instead of one big container. TrueCrypt, a free and open-source (donationware) product, lacks such organizational features (though you can make as many volumes as you like), and has a more spartan interface; it gives you full-disk encryption, however, as well as features designed to keep data secure even if you're forced to provide a key. A detailed documentation file covers not just usage information but also explanations for what TrueCrypt does and how it works, letting users make informed decisions about settings and options.