http://www.groovypost.com/howto/geek-stuff/password-protect-encrypt-microsoft-office-2010-documents/

This is a great explanation on how to Password Protect your files.

How To Password Protect A Word or Excel 2010 Document Using Built-in Office Encryption

Step 1 – Click the File tab, then Click Info.  On the menu to the right Click Protect Document and Click Encrypt with Password.

Step 2 – The Encrypt Document dialog will appear, Type in a strong password and then Click OK to finish.

Please note – It’s very important to use a strong password or pass phrase step #2.  Yeah yeah… you don’t need to get crazy here with wild $ymb0ls and upper and lower case characters which you will forget in 10 minutes. However, using a simple dictionary word will allow anyone with a $100 password cracking app to gain access to your document.  Using a long pass phrase however (IE: my house is yellow) with 10 or more characters will significantly increase the encryption strength of the document and decrease the likelihood someone will be able to break the encryption and gain access to your document. I’ve written a detailed article on strong passwords and pass phrases so be sure to check it out before you choose a password for step 2.

After choosing a password, your document should be protected!