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The Encrypting File System (EFS) is another technology designed to protect data. Files that have been protected using EFS are encrypted at the file-system level. The benefit is that the user with the appropriate private key and certificate is the only one who can open the file. Even if you reinstall the operating system, the files are still inaccessible.
To encrypt a folder, right click the file and select Properties. From the General tab, click the Advanced button. Select the Encrypt contents to secure data option. Click OK.
Once you complete these steps, Vista encrypts the contents of the folder as well as any files you add to the folder. When you access a file within the folder, the contents are automatically decrypted.
Any encrypted folders and files will appear “green” within Windows Explorer. This lets you easily identify what is and what is not encrypted.