1. Plug in the external drive you wish to encrypt
2. Make sure all previous data on the drive has been saved else where. Formatting the drive will erase all data on the drive.
3. Open up Disk Utility. You can find this by clicking on the magnifying glass in the upper right hand corner and search for "Disk Utility". You may also open through System Preferences.
4. In the left hand panel select the External Drive you wish to encrypt
5. For Format select "Mac OS Extended (Journaled, Encrypted)
6. Name the drive
7. If you want to prevent the recovery of the disk's erased data, configure its Security Options
8. Click Erase
9. Type in a Password and Password Hint (optional)
10. Wait for Drive to finish formatting. Eject and test. The Drive should prompt a password before opening.
11. If the drive is unable to encrypt, this is likely due to some previous encryption that isn't allowing Disk Utililty to reformat the drive. This will require some more work in Terminal.