This question has two types of answers, depending on whom you're trying to keep the documents secret from.
If you're keeping them secret from someone equivalent to your kid brother, then programs like Word usually have an option to add a password when you save them, as saxy_jag says.
However, this offers next to no security if you're trying to keep secrets from the likes of the NSA. To do this, you require proper, tried and tested encryption. GnuPG is about the best there is, and works well, but it's a little complicated.
TrueCrypt also works well, but the developers are a little 'dubious'. It's also a little more complicated than required.
I can recommend this free program:
http://www.axantum.com/AxCrypt/
To use it, you simply have to right-click a file, and click the 'encrypt' option, then enter a password. Don't forget the password, because you won't be getting your information back if you do!
As for folders, I'm not sure if AxCrypt can encrypt a folder automatically. If it can, great. If not, you can zip (or compress) the folder, using stuff built into Windows (I think it's in the right-click menu again). This turns the entire folder into a single file, which can easily be turned back into a folder (unzipped, or uncompressed). Then simply use AxCrypt on the zip file.