I have to put in another vote for TrueCrypt. It has one thing most of the other methods don't: plausible deniability.
Basically, you create a hidden, encrypted volume within another encrypted volume. Password#1 will take you to a basic encrypted volume where you would put normal, innocent files, such as images of armchairs. Super-Secret password#2 is what gets you to the good stuff.
The great thing about this is that if you are ever uhh.."requested" to show the contents of the encrypted volume, no problem. Type away password#1, and show it off. Hidden volume #2 will never even show up until you enter your Super Secret Password.