TrueCrypt volume contents are indistinguishable from random data.
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Fortunately, on-the-fly data encryption is no longer some exotic, costly beast. Rather than just encrypting single files, some applications are able to create virtual disks, either within a file or directly on a partition, where everything written to the disk is automatically encrypted. On modern hardware, the overhead for encryption is minimal; you no longer need dedicated hardware to make this happen.
In this review I've looked at several programs for creating and managing encrypted volumes, from Windows Vista's own BitLocker encryption to PGP's full-blown desktop suite for encrypting e-mail and instant messaging. You can even get remarkably strong, well-implemented whole-disk encryption without having to pay for it -- although in a corporate setting, features like manageability or support are well worth paying for.
Web site: www.truecrypt.org
TrueCrypt makes an incredibly strong case for being the first whole-disk or virtual-volume encryption solution to try out. Aside from being free and open source (two big pluses), it's full of smartly written usability and data-protection features and is an effective way to encrypt a whole system, including the OS partition.