MacOS X has always had the option to create encrypted disk images, but it has not always kept the passwords on the keychain properly.
I am not sure when this was fixed (Jaguar) but it works now – If you do not want to encrypt your entire home directory into a disk image (which is essentially what FileVault does) then just use Disk Utility (On panther, disc copy on Jaguar) to create a new encrypted disk image. Then when you set the password, add it to the keychain.
Any files you alias to on the disk will cause it to mount, just like a network disk (though LaunchBar does not do this) I use Quicken so when I log in, it opens the file to ask me for my quicken password – that makes the image mount, and now all of my files on that image are available.
I would imagine that if you want to copy the image to another disk, you would want to eject it off the desktop first.