TrueCrypt is a good free and open source disk encryption software which support all major operating systems. There are two ways to encrypt data in a portable disk. One way is to encrypt the whole disk. But if you encrypt the whole disk you need to have TrueCrypt in your host machine to view data on it. But if you chose the other way, you can keep a portable TrueCrypt in the same disk with the encrypted data.
I will describe how to do this in the second way. I think it is more user friendly to have a portable TrueCrypt with encrypted data file. First we need to download and create a portable version of TrueCrypt.
You can download it from : http://www.truecrypt.org/downloads (> 4 MB)
Double click on the downloaded executable;
1. Accept the license regalement.
2. Select the second option - "Extract" and click next.
3. Accept both warnings and proceed.
4. Browse the portable disk and set a folder name to store TrueCrypt. ( I:\TrueCrypt\ )
Now you have a portable version of TrueCrypt. Now you need to create an encrypted disk. But in this scenario we are not going to encrypt the whole disk. We can create an encrypted container and put our valuable data into that. Then the container and the TrueCrypt portable can be stored in the portable device.
To create the encrypted container;
1. Run the "TrueCrypt Format.exe".
2. Select the first option - "Create a encrypted file container"
3. Select the first option - "Standard TrueCrypt volume"
4. Set the file with in the portable device ( I:\TrueCrypt\encrypted_datafile ) and save.
5. Set the encryption algorithm.
6. Give the volume size you need.
7. Give a strong password. This will be your to access the encrypted data in the container.
8. Format the volume and continue the wizard.
Now we need to mount the encrypted container to the system. To do that;
1. Run the "TrueCrypt.exe".
2. Select a available driver letter to mount the container to the system.
3. Press on "Select File ..." button and browse the created container in the portable device.
4 Click on "Mount" button.
5. Give the relevant password.
6. Brows the mounted drive and store valuable information in that.
7. Click on "Dismount" to dismount the container.
Note: You need to have Administrator rights or (rights to mount a disk to the OS) to run TrueCrypt in portable mode.