File security and privacy is important for your sensitive data. The DMG disk image is a versatile tool that allows you to encrypt your data and enable password protection on a virtual disk image.

Now that we’ve setup the Mac to accept SSH connections securely using key authentication instead of passwords, what can you do with it?
This section will describe how to transfer files using a program like Transmit, controlling your home computer using VNC and routing traffic through the SSH tunnel to keep your information safe and protected [...]

There are numerous ways to protect the contents of your Home folder using applications such as PGP or TrueCrypt, but OS X has the ability built-in. FileVault, which can be activated and managed from the Security pane in System Preferences, converts your Home folder into an encrypted disk image.