BitLocker is a handy tool that comes with the Enterprise and Ultimate Editions of Windows Vista and 7 and is also available in the Windows 8 Consumer Preview (to say in what editions of Windows 8 it will be present is not yet possible since the number and form of editions have not been revealed yet).
As the name suggests its functionality is to lock things, drives, to be more specific. You can assign BitLocker to encrypt a whole device with a password by just right-clicking it and selecting Turn on BitLocker.... A wizard opens that let's you choose a password or insert a SmartCard whose PIN will be used for encryption. After the wizard finishes and the drive is removed, it will have to be unlock by the given means to be used again.
Be careful if you use BitLocker on removable drives! BitLocker encrypted drives can only be used on Windows system. Plugging it into a Linux box will give you nothing but a bunch of executables and other cryptic files.
If you happen to forget your password, BitLocker gives you the option to export a recovery key before the encryption of your drive. This is a text file containing a code similar to a serial code and can be used to retrieve data behind a forgotten password.
To decrypt a drive, just enter the password, right-click the drive and choose the appropriate option.