public with sharing class demoencrypt {

    Blob key;

    public demoencrypt() {
        key = Crypto.generateAesKey(128);
    }

    public PageReference translate() {
        if(mode=='encrypt') {
            result = EncodingUtil.base64Encode(Crypto.encryptwithmanagediv('AES128',key,blob.valueof(source)));
        }
        if(mode=='decrypt') {
            result = Crypto.decryptwithmanagediv('AES128',key,EncodingUtil.base64decode(source)).tostring();
        }
        return null;
    }


    public String result { get; set; }

    public String source { get; set; }

    public String mode { get; set; }
}

<apex:page controller="demoencrypt">
    <apex:form >
        <apex:pageBlock >
            <apex:pageBlockSection columns="1">
                <apex:selectList size="1" value="{!mode}">
                    <apex:selectOption itemValue="encrypt"/>
                    <apex:selectOption itemValue="decrypt"/>
                </apex:selectList>
                <apex:inputText value="{!source}"/>
                <apex:outputText value="{!result}"/>
            </apex:pageBlockSection>
            <apex:pageBlockButtons >
                <apex:commandButton action="{!translate}" value="Translate"/>
            </apex:pageBlockButtons>
        </apex:pageBlock>
    </apex:form>
</apex:page>

This page demonstrates the basic power of encryption/decryption in salesforce. Obviously, the key generated is lost when the page is reloaded, so normally the key would be stored in a custom setting or database object. The "withmanagediv" is simply used so that we don't need an initialization vector, but you could use the normal encrypt/decrypt methods as well with an IV (this will reduce the output by a decent margin). Finally, do not store the key or IV in the view state at all (this is only a demo page).

See: http://www.salesforce.com/us/developer/docs/apexcode/Content/apex_classes_restful_crypto.htm