The only way to password protect data is to use encryption. It would theoretically be possible to zip or compress the files and use a password to protect them which would however mean that the data would need to be uncompressed before it could be used.

All you need to password protect CDs or DVDs is True Crypt (or another software that can create encrypted containers). The Open Source encryption software can create so called containers that can be filled with data. These containers are password protected and can only be accessed if the correct password is supplied. The user does need True Crypt on the other hand to access the CDs and DVDs.

Start by downloading True Crypt from the official website. Click on the Create Volume button after installation. This opens a wizard that can be used to create an encrypted file container.

Select to create a standard True Crypt volume.

Now select a filename and location on the hard drive for the container.

Keep the algorithms and select an appropriate size for the container. You might need to experiment with the sizes a bit. If sizes do not matter that much select 650 Megabytes for a CD container and 4000 Megabytes for a DVD container.

Now select a password and use the format button to format the container.

Now that the container is created it needs to be mounted which basically means to use the password to make it accessible in Windows. Click on the select file button in the True Crypt main menu and locate the created container. Now select the Mount button. True Crypt will ask for a password. Just enter the password supplied to access the container. The container becomes available as a drive letter in Windows then. You can now transfer data in the container. Once all data has been added it can be burned to CD or DVD depending on the size of the container.

The user then needs to select the file on the CD or DVD whenever data on the disc should be accessed. Everything else will remain the same.