With Windows 7 Microsoft is expanding BitLocker so users can easily encrypt USB flash drives. What does this look like? Well it looks a bit like this:
It then has a look at the drive for a few seconds and asks you how you want to unlock the drive, using either a password (8 characters minimum) or using a smart card and a PIN.
It then forces you to either save the keys used for encryption or print them off, good for sticking in a safe somewhere - good idea because if you forget your password and don't know the keys your data is gone.
After clicking next it'll go ahead and encrypt the drive. This can take a while, especially on larger drives.
Once that's completed you'll be prompted to enter your password when inserting the drive. You also get the option of automatically unlocking the drive for your user account.
If you want to read the drive on Windows Vista or Windows XP you can, as it comes with a small application that can decrypt the device to allow reading, but not writing.