You can encrypt a folder in Windows XP so that it cannot be read by others. Please note that the encryption is only applicable in the NTFS file system. You can encrypt a folder by doing the following steps.
1. Right click on the folder, which you want to encrypt and click properties.
2. On the general tab click Advance.
3. On the compress and encrypt attributes press the Encrypt contents to secure data.
4. Click ok.
5. If you want to encrypt only the folder click “Apply changes to this folder only” and then ok.
6. If you want to encrypt the all the contents of the folder and the parent folder then click Apply changes to this folder, subfolders and files.
Now every file or folder that will be created in the encrypted folder will automatically be encrypted. The users of the network can view the items of the encrypted folder but they cannot copy or open the contents of the encrypted folder.