Encrypted File System In Vista
Files that have been protected using EFS are encrypted at the file-system level. The benefit of this is that the files can only be opened by the user with the appropriate private key and certificate. Even if you were to reinstall the operating system, the files would still be inaccessible.
You can encrypt a file using the steps listed below. An important point to remember is that a file can not be both encrypted and compressed. If compression is enabled, it will be disable when encryption is enabled.
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