Dumping your data on third-party servers—as you do with any cloud storage provider—carries inherent security risks. Encrypting your data before you deliver it to SkyDrive or Dropbox helps ensure that prying eyes will never see the true contents of your stash.
The free and open-source TrueCrypt is our go-to encryption service, but having to muss with entire volumes to access a single file makes it cumbersome for the cloud. BoxCryptor lets you encrypt and extract single files, a much less frustrating process. Check out PCWorld's BoxCryptor review and guide to encrypting your cloud storage for more info.