I’ve long been a fan of TrueCrypt. I use it to hold sensitive information locally as well as to hold backup data which I upload to an online backup service.
For local data, I store passwords/etc. into a thoroughly encrypted TrueCrypt drive which I mount/unmount as needed. I’ve been very happy with this solution, the only slight drawback being the hassle of typing in my passphrase to open the drive.
But now I’ve come across another potential solution. It’s a USB drive with a built in fingerprint reader. The drive is from BioSlimDisk and is said to be “driver less” meaning it doesn’t run or install software on your machine. Apparantly, all processing/encryption is done in hardware — dependent on the verification of your fingerprint. I think I’ll order one to give it a try. I can imagine using the USB/Fingerprint solution along with TrueCrypt for the times when I feel most paranoid….