Well there are various dimensions to this question. Whether you want some software in terms of encryption, password protect folders or any other feature, but, the ones that I have tried and been using for years now are Mozy (for cloud storage), Data Protecto and True Crypt. They have combined features and can perform various security functions all at once.
The Vista tool used to encrypt an entire hard drive is BitLocker Encryption.
You can encrypt the files/folders with password if the drive doesn't support encryption. Since drives with encryption feature are costly, you can use software to encrypt the files on drives. For example, TrueCrypt, 7 zip, Kakasoft Folder Protector are all good encryption software.
Kakasoft Advanced Folder Encryption has a function that helps you to hide a entire hard drive. If you need it, you can visit their site: http://www.kakasoft.com/folder-encryption/how-to-encrypt-files.html
You would either encrypt the data, or and, encrypt the folder or hard drive, flash drive, etc.
Since there's no BitLocker feature in Windows XP, you can only use 3rd party software to encrypt your drive. You can try Kakasoft Advanced Folder Encryption, which is also good at encrypting files/folders on drive and hiding hard drive on computer. You can find it here: http://www.kakasoft.com/folder-encryption/
Since you are using Win 7, you can encrypt entire hard drive with BitLocker. Search "BitLocker" on google, you can get many how-tos about encrypting drive. If you don't want to encrypt the drive or you are afraid you will lose all content in drive when forgetting the password, you can also use third party software such as Kakasoft Advanced Folder Encryption to lock and hide drive with password.
You have a few options. You could either make a password protected folder within the HDD and place your files in there. You could also encrypt the entire HDD with encryption software such as truecrypt. There are many options available for File protection / Encryption. You can try to use third party software to lock the flash drive, for example Kakasoft USB security
I've used Kakasoft Folder Protector for file encryption. It adopts 256-bit AES encryption technology and is able to encrypt files on computer or drive.
A person could use the software TrueCrypt or Kakasoft USB security program Or one could buy a flash drive that already has encryption software already installed.
In general, TrueCrypt is considered to be one of the best encryption tools around. You can even encrypt a separate partition on your hard drive.
BitLocker Drive Encryption
There are many types of software that can be used to encrypt a hard drive. One would be likely to use a program such as GNU Privacy Guard since it is a popular software.