There’s a feature built into OS X that will allow you to create AES-128 encrypted disk images. You can use this to create mountable, encrypted virtual drives, or even burn password protected CDs. Here’s how:

1. Open Disk Utility in the Applications/Utilties folder.
2. Click “New Image”.
3. In the “Encryption” pull-down menu, select AES-128
4. If you want to make a CD, make sure the size is small enough to fit on a CD, typically 610MB.
5. Enter the name and location of the image file and click Create to finish.
6. You will be asked to enter a password for the new image. Pick a good one.

Disk Utility will create a .dmg file in the location you specified and it will automatically be mounted and appear as a new drive with the size you specified earlier. You can drag files to this drive and they will be added to the encrypted image. When you are finished, just eject the drive by clicking the eject icon next to the drive in the Finder. Once the drive is unmounted/ejected, anyone attempting to mount the image will be required to enter the password you specified.

If you want to make a password protected CD, just insert a blank, recordable CD (or DVD) and drag the .dmg file to it in the Finder. Just like the dmg image, the CD will require a password to be entered before it will mount.