Password Protecting Documents in Word XP/2003

When you're finished with your document, click "Save As."

Then click the "Tools" button at the top right of the Save window and select "Security Options":

Enter a password in the "Password to open" box:

If you want to prevent others from modifying the document, you could enter a separate password in the "Password to modify" box.

For maximum security, you should only share the password with the recipient in person or over the phone.