When to consider using encryption?
Encryption should be used when transferring sensitive information across insecure channels. These insecure channels can range from websites, email, USB drives and the Internet as a whole. Each channel also has its own encryption tool to utilise. Websites use SSL certificates, Email can utilise certificates and use tools such as PGP and Smime, or alternatively simply using a password protected zip file when emailing files or storing files on devices (as long as the password is kept separate).
If you are storing a large amount of sensitive information on a local hard drive, rather than passwording a large amount of individual files, you can utilise full disk encryption technologies such as inbuilt FileVault functionality for Mac OS X or BitLocker for Windows platforms.