I'm watching
The Other Man (2008) right now, when a password dialog pops up when he tries to open a folder:
I've been looking for the same thing for ages, but never found anything exactly like this though. It seems native OS X, but I don't know they did that.
Anyway, yes, you can hide or encrypt files and folders. And yes, you can create encrypted images with a password or create a separate account. But that's just not the same as having a folder in plain sight that'll simply ask you to fill in a password when you double click it. When I'm at work I don't want to lock my MacBook every time I walk away, but I also don't want people to be able to access some personal files and folders. So something like this is preferable.
However, here's a topic with some more info on encrypting folders:
http://theappleblog.com/2008/10/31/espionage-brings-folder-encryption-to-os-x/
They talk about Tao Effect's
Espionage which comes pretty close. You can lock individual folders (among many other things) with this as a result:
I used an early version of Espionage, but had some problems with the app back then. But this was probably due to some other hacks that made it incompatible, and there've been many updates since. You might want to give it a try; the video of version 2 seems pretty cool.