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#21
There is actually an encryption feature in Windows 7. You can select it for individual files/folders. Simply open the file properties dialog, click on the Advanced Attributes button.
Check the 'Encrypt contents to secure data' option.
After pressing OK, make sure you apply the setting to all files and subfolders. Windows will then show you options to save the encryption key.
I don't know if this will wipe deleted files.
Hope this helps.