Encrypting Disk Images in OSX
You can use the built in FileVault feature to encrypt your whole user directory in Mac OSX. However, this usually comes with an overall price on performance. Additionally, if you use Time Machine and Filevault together, your home directory gets backed up once you log out of your machine.
There is however, another option. You can make a mountable Encrypted Disk Image (any size) of your own to securely store your confidential files. This will allow you to turn FileVault off for best system performance, giving you the ability to backup your password protected images to CD-R or DVD-R, or other removable media.
Lets get to it. Although you can make the image any size, for this example we will make a file that is 660MB, so it can be backed up to a CD.