WARNING: As of 28 May 2014, TrueCrypt is no longer maintained by its developers, which might have security implications. However, TrueCrypt version 7.1a is generally still considered safe. 
Step 1: Get TrueCrypt
Step 2: Install TrueCrypt
Step 3: In Truecrypt select the “Create Volume” option
Step 4: Follow the instructions of the "TrueCrypt Volume Creation Wizard"
Step 5: Select a drive letter in the main TrueCrypt window
Step 6: Select your TrueCrypt container or drive using the "Select File..." and "Select Device..." button
Step 7: Click the "Mount" button and enter your password. A new drive will now pop up in "My Computer"
Step 8: Store your sensitive files on that drive
Step 9: Click the "Unmount" button to unmount the drive
For additional security, encrypt your bootdrive with TrueCrypt.