Say you like the idea of FileVault but you prefer not to have your entire home directory. Or you're tired of reclaiming disk space in the sparseimage each time you log out. Or you just need quick, simple encryption on a per-directory basis.
It's possible now with
MacFUSE and some plugins and utilities. First, you'll need
MacFUSE, which enables you to set up, mount, and access different types of filesystems that aren't supported in the kernel, instead it's done in userspace. Also recommended, but not required, is
MacFusion, a GUI front end to MacFUSE. It makes things tremendously easier.
Finally for the encryption filesystem support you'll need the EncFS FUSE plugin. I searched forever for the Mac version, the original appears to have
disappeared but fortunately you can download it from the
EncFSVault file downloads page.
EncFSVault is a software project intended to be a direct EncFS-style replacement for FileVault. If you don't want all that though you can just grab the EncFS plugin off the downloads page.
Now with all three components installed you can create and mount an encrypted folder as a new volume on your desktop. From the MacFusion icon in the menu bar, choose Quick Mount, and then EncryptedFS.
If you're creating an encrypted volume for the first time, check the box after you give it a name and a path. Next, you'll be prompted for the password you want to use. Finally what you'll end up with is a new volume mounted on your desktop.

Because it's just a single directory, it doesn't have its own distinct space allocation so you can add files to it, just as much as your disk drive will hold. Add and create files and folders:

And the contents will just appear as jibberish if you try to browse the actual directory:
