donthateme13,
I've gone ahead and done some research into this. Once you turn on encryption on your media card, pictures are encrypted and stored with a ".rem" extension on your media card. I didn't spend a lot of time checking how secure it is, but you can't view the image by just changing the file extension.
That being said, pictures taken *before* you turn on encryption on your media card are not encrypted.
Here's a screen capture from windows explorer:
My Media Card Settings are:
Media Card Support: On
Encryption Mode: Security Password & Device
Encrypt Media Files: Yes
Mass Storage Support Mode: On
Auto Enable Mass Storage Mode When Connected: No
Hope this helps!