What is FreeOTFE? FreeOTFE is a free, open source, "on-the-fly" transparent disk encryption program for PCs and PDAs
With this software, you can create one or more "virtual disks" on your PC/PDA. These disks operate exactly like a normal disk, with the exception that anything written to one of them is transparently, and securely, encrypted before being stored on your computer's hard drive.
Features include:

• Highly portable - Not only does FreeOTFE offer "portable mode", eliminating the need for it to be installed before use, it also offers FreeOTFE Explorer - a system which allows FreeOTFE volumes to be accessed not only without installing any software, but also on PCs where no administrator rights are available. This makes it ideal for use (for example) with USB flash drives, and when visiting Internet Cafés (AKA Cybercafés), where PCs are available for use, but only as a "standard" user.
• Source code freely available
• Easy to use; full wizard included for creating new volumes
• Both PC and PDA versions are available; data encrypted on your PC can be read/written on your PDA, and vice versa. Supports all versions of MS Windows from Windows 2000 onwards (including Windows 7), and Windows Mobile 2003 and later (including Windows Mobile v6.5)
• No need to install it; making it ideal for use on USB memory drives, etc
• Support for encrypted Linux volumes (Cryptoloop "losetup", dm-crypt and LUKS)
• Available in English, Spanish, German, Italian, French, Czech, Japanese, Croatian, Greek and Russian - with support for other language translations
• Optional support for smartcards and security tokens
• It's powerful: Supporting numerous hash (including SHA-512, RIPEMD-320, Tiger) and encryption algorithms (including AES, Twofish and Serpent) in several modes (CBC, LRW and XTS) - providing a much greater level of flexibility than a number of other (including commercial!) OTFE systems
• Encrypted volumes may either be file, partition, or even disk based
• Much more!

See the full features list and screenshots for more details! 
http://www.freeotfe.org/