You can password protect folders, but you have to use 3rd party applications. If you want to do that, check
versiontracker.com
1) To use Disk Utility, opent it up (located in Applications>Utilites>Disk Utility)
2) Look at the first picture, where I circled the New Image icon. Click on that
3) Select your size, you can make it 660 MB to fit a CD, or make it a custome size, like 1 GB (picture 2)
4) Select the option to Password protect it, by selecting AES-128 (picture 3)
5) look at your desktop, there should be two file that look like picture 4 (the one with the green circle)
6) Now drag all your file to the image (the one with the green circle).
7) Drag the image (with the green circle) to the trash
You now have successfully password protected your files.
*cough*porn*cough*