TrueCrypt works well, and is excellent for the paranoid - you can hide stuff at two levels: one that you give away under duress to MI5 when they are torturing you, and one that you don't reveal.
If you forget and write lots of stuff to the "non-hidden" part of the stick, it can sometimes overwrite the encrypted bit. I've not got that far into it, but a friend of mine lost a load of case notes that way.
If you hide a LOT of stuff on it, MI5 will realise there's more there than you've revealed, but they are not likely to be able to crack it.
I gave up using it because i could never remember the passwords. Writing them on the wall rather defeated the purpose.