http://www.truecrypt.org/ Use a full volume encryption in TrueCrypt. Most secure way to do it. note: This requires you to format your entire drive with new encrypted file-system. So if you have any files on there, back it up onto another drive, encrypt the drive, and then move the stuff back on.
Ok, put them in a box, and in the box hookup a shotgun shell to explode when the box is opened. Then put a button on the back that disables the shot, so you can open it. This, unlike encryption, prevents multiple attempts at your data. Note: Don't try to get your hard drives when tired and/or drunk... might not work out so well Disclaimer: Don't do this.
If your advice was serious, I could still say that you could never know if the file was actually an encrypted volume or not for sure, considering how you can name it anything... (just name it a random cab file and throw it in with a bunch of others...) *shrug*
is there a way i can password protect folders, or do i have to do the encryption thing for that as well?
Password protecting folders can easily be bypassed. You could use DirLock, but only use it if you're trying to protect from someone who doesn't know Windows well, as it can be easily bypassed by going into the security tab and changing the permissions of the folder to allow the user in. Like I said, for near-hacker proof protection, go for the encrypted volume using TrueCrypt, as I doubt you'll have anyone bruteforcing it, and you can't just easily change the permissions to allow you in (like DirLock or pretty much every other similar program to it). If you want security, there's no lazy way to it, otherwise even the laziest could circumvent your security.