OS X has long let you encrypt external drives, and even your Mac HD. Mountain Lion has actually made it even easier to encrypt external disks with just a few clicks. It's sometimes a good idea to do so on items such as backup disks. This way, if they ever fall into the wrong hands, no one should be able to access your data without the password you have set to decrypt it.
If you aren't sure how to encrypt your data, follow along and we'll show you how.
That's all there is to it. Your Mac will now start encrypting the disk that you've chosen. This process could take quite some time depending on how much data you've got stored on it. Right clicking will show you if the disk is still encrypting.
As a side note, anytime you connect this external drive, you'll be asked for the password you set up unless you save it in your Mac keychain. Just be careful not to save this password to any Macs that you don't want to always have access to the drive when connected.