When you save a new archive in a format that supports encryption ( 7z or zip ), you can enter a password for encrypting its contents. Click on the button next to "Encryption" to enter a password.
Entropy uses the AES-256 ( Advanced Encryption Standard, 256-bit ) algorithm. This is supported by most modern archives.
For certain archives ( currently only 7z and rar ), you can encrypt both, the data contained in the archive and the header of the archive. Encrypting the header also prevents anyone from seeing the contents of your archive without first entering the correct password. Contrast this with data only encryption, where the filenames are visible to anyone and only the data contained in the files is encrypted.