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Using the encrypted lock box on Mac Lion?

Last Modified: 2012-06-27
I am new to Mac but remember hearing there is a feature of Lion or an add on program where I can lock files with a password, and that it's protected by encryption?

- What's that called?
- Is it public key / private key encryption?
- How do I toggle between locked and unlocked states?

I would put my 1Password files there, I imagine.
I would also put my source code repository there was well.

- How does this form of encryption work with TimeMachine?

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