This answer explains how to create a crypted file that can be mounted via a loopback device using AES encryption.
First, create a file of the appropriate size. Let’s say we want to create a file the size of a DVD-R, i. e. 4.37 GByte.
dd if=/dev/urandom of=./cryptfile bs=1024k count=4100
Now create the loopback device
losetup -e AES128 -T /dev/loop1 ./cryptfile
A 128 key demands a passphrase of 20 characters, 192 and 256 keys need 32 and 43 respectively. Next, you need to establish a filesystem on the cryptfile, in this example we use ext2.
mkfs -t ext2 /dev/loop1
The loop can be closed now.
losetup -d /dev/loop1
salvaged from Wayback Machine at 2025-12-05, , original timestamp 2005 -11 -25