use Truecrypt
not only can you encrypt the files, you can hide them from view , or hide the partition they are on
You can also now buy relatively cheaply pen drives which come with their own hardware encryption, but that won't actually hide the files.
what you use depends on what you want it for. If you need to avoid detection of your posession of the files, then you need Truecrypt. By using that, the existence of the files is totally deniable