How can i setup password to my files in Windows OS?

I am using windows operating system XP service pack 2. I want to setup password protection to my individual files and folders but I don't know any way how to setup password protection for individual files and folders. In windows XP, is there any tools to setup password protection for files and folders? I want to know please tell me and can anyone explain is there any same tools in windows seven?
I am willing to use windows seven in future so I want to know how can I use password protection in that system. Do I have to use any third party software to do this? If I have then can anyone tell me which is the best one in free? If you have any links of that kind of software's then please gave it to the answer. I will be glad if you give me some detail answer. So best of luck.
