How to password protect or encrypt Excel spreadsheets

How to set spreadsheet security in Excel 2002/2003

There is not something like an "encryption button" in Excel. On the other hand, encrypting Excel spreadsheets is just a few clicks away.
route 1: Tools | Options | Tab Security

route 2: File | Save As | Tools | General Options | Tab Security

File encryption options in Excel via the 'Save As' Menu

Security settings in Excel 2002/2003

The Security tab shows different security settings:
Open password
This password is used for spreadsheet encryption. This security feature is discussed in the next paragraph.
Modify password
This password is used for convenience when sharing spreadsheets. This password does *not* encrypt the spreadsheet and therefore does not add security. This modify password opens the Excel spreadsheet in an editable modus but prevents the original file from being overwritten. The modify password is stored within the Excel spreadsheet. There are tools available that can extract and remove this modify password.
Read-only recommended
This is a recommendation to the person opening the spreadsheet. On opening, Excel asks the user to choose read-only unless the user thinks that changes to the spreadsheet are necessary. It's just a recommendation, no security.