In Lion, Apple not only added the feature to encrypt a complete drive but also started to allow users to encrypt the data on an External Hard-Disk connected via USB port.
Though you can’t readily encrypt a Hard-Disk which has a data on it but you will need to format the drive using HFS+ file format for the drive. This disk will not be detected by any other Operating System other than Mac OS X Lion, not even its previous versions so you might need to upgrade all your products before you connect this disk to other Computers.
Step 1:
Connect the Hard-Disk to your Mac and wait until it gets detected. Launch Disk Utility and select the drive you want to encrypt in the left column. Then select Erase from the top menus in the right column, a Format menu will pop-up select either Mac OS Extended (Journaled, Encrypted) or Mac OS Extended (Case-sensitive, Journaled, Encrypted) which both are new in Lion.
Try to choose Mac OS Extended (Journaled, Encrypted) as the other one only adds a feature to allow the users to save case sensitive file names within the same folder.
Then provide a name to the drive and click “Erase”.
Step 2:
Another window will pop-up for confirmation for encryption and asking for a password. You will have to provide password and memorize it for further access to your Hard-Disk each time (If you forgot the password then you will not be able to access it in any case). Then again click “Erase” and it will start formatting your drive which might take several minutes depending upon the size of the disk. Here the encryption of the disk is done. Whenever you copy data to the Hard-Disk it will be automatically encrypted and decrypted whenever you access it.
At the password entry window you can save your password to the Keychain which is useful to on your Personal Mac as enabling this will automatically mount your hard-disk each time you connect it. If you connect the Hard-Disk to another Mac you will need to enter password each time you want to mount it.
As the encryption is core based in Lion it won’t conflict with any other programs and this also has reduced the time for encrypting and decrypting the data.