Mac – Encrypt External Hard Drive for Mac and Linux

What you are looking for is encrypting a drive "in place". Some software packages do provide this, however you can also do this with Lion's built-in whole disk encryption, which you have to enable via the terminal, since the diskutility does not expose this functionality. It was intended only to encrypt the main OS disk in place, but is available if you need to do it by hand for other volumes.

Instructions can be found here:

http://www.red-sweater.com/blog/1935/lions-whole-disk-encryption

Excerpt:

To convert an arbitrary volume to Lion’s whole-disk encryption, you use diskutil’s core storage “convert” command, and provide a passphrase. For example, if you have a volume called “Data” attached to your Mac, you would run something like this from the command line:

% diskutil cs convert /Volumes/Data -passphrase [yourPasswordHere]

What this does is kicks off a conversion process similar to what the System Preferences panel does when allowing you to convert your main startup volume to core storage with encryption. At any time during the conversion, you can use the diskutil command again to see status of your volumes, whether they are encrypted, not encrypted, or in-progress while converting.

% diskutil cs list

You’ll see a bunch of information, but search carefully for the named volume (e.g. “Data”) that you just started the conversion process on. You’ll find a line starting with something like:

Size (Converted):

This shows you what the progress in the conversion is. From time to time, check this manually, to see how far along things have progressed.

I'm not sure that this will work on a network volume. If not, check out TruCrypt carefully. It allows in place encryption of non-system windows volumes, and so it may have the same functionality for OS X volumes. Otherwise, the google search (first link in this answer) does bring up some other options.

Make sure that your partition scheme is GUID, not Master Boot Record (MBR) or Apple Partition Map.

To enable encryption, the partition map must be changed to GUID. Note that this will make your drive invisible to older PCs and will wipe all of the data on the drive.