Linux.com: Transparent Cryptographic FileSystem

This document explains how to setup and then use a
filesystem that, when mounted by a user, dynamically and
transparently encrypts its contents.
The filesystem is stored
in a regular file, which can be hidden or named non-conspicuously
such that it would most likely be overlooked. This allows for a
high level of secure storage of data.”

“This process requires the kernel source code, knowledge of
compiling this code, and a lot of patience. I highly recommend
having a boot disk ready. Also, be sure to have a backup before you
permanently store your important data on the encrypted filesystem –
it can be curroupted like any other filesystem.”

“As a minimum, you will have to patch to at least version 2.2.9
of the linux kernel before continuing. There are further
instructions on applying patches in the Details section later in
this document.”