Windows lets you hide folders. However, if someone gets hold of your computer they can easily view hidden folders. If you're computer is likely to be used by many users, you'll need an additional level of security.
Windows doesn't come inbuilt with the ability to hide and password protect folders. If you need to do so, you'll want to check out SecretFolder. SecretFolder lets you quickly add and password protect one or more folders just by dragging them onto the software.
If you have been using your USB drive for a while, you'll soon notice that there are quite a few "junk" folders and files created. In fact this is true for most of the folders on your system. One solution is to manually sit and clean all the files.
Keeping your files safe is one worrisome issue. I have multiple backups of my files, both on an external hard disk as well as on two online file backup services. When you have a few hundred megabytes to backup, you can just replace the folder time and time again.
Frequently accessing the same folders? Or maybe you have a game or software copied to a folder that needs to be installed. Visual Subst is a small tool that allows you to associate the most accessed directories with virtual drives.
Take it from Microsoft to jump into the fray for Online Storage and then show why they can attract customers / users. In an announcement on the Windows Live SkyDrive blog, Microsoft announced some updates to their online storage service. Space has been increased five fold from 5GB to 25GB of free online storage Control your data.