You can use the Encrypting File System (EFS) in Windows XP for drives that have formatted to use NTFS. EFS provides a way to hide file content from other users. Many users, especially those who use laptops that are vulnerable to unrestricted access or even theft, need to encrypt data files that hold confidential or sensitive data.
You can use the below method to identify encrypted files: Change the Color of the File Listing for Encrypted Files
To change the color of the file listing for encrypted files:
1. Double-click My Computer, and then click Folder Options on the Tools menu.
2. Click the View tab.
3. Click to select the Show encrypted or compressed NTFS files in color check box, and then click OK.