With SteganPEG you can hide files inside JPEG images without altering them to the human eye, being JPEG one of the most common file formats that exist that will reduce suspicions when you upload it to a website, facilitating covert communications, flickr is an example of a website that can be used to share secret stego messages embedded in pictures with nobody noticing.
You can password protect your files, even if someone analyses the image they will still need to know the passphrase to see the data although there is no mention of encryption being used to cipher the file, this is still better than nothing and enough for low security needs, another nifty feature of this open source stego software is that it shows you how much space remains available on a picture to hide data inside it.
The hidden data you insert inside the JPEG is compressed first, you can hide any kind of file, text, images inside images or executables but the bigger the file the more difficult it will be to fit in inside the JPEG.
This steganography software only supports DCT based Baseline Sequential JPEG images, the most widely used JPEG compression, when you download SteganPEG you also get the source code and can look at or modify it at your own discretion.
Steganography vs. Cryptography
While cryptography ciphers your data and makes it available to only those with the right passphrase, steganography hides your confidential files making it impossible for someone to investigate and try to extract something whose existence is not obvious.
Steganography does not use cryptography per se, it uses the spare bits that files have and use them up to hide data inside them, it is possible to detect and extract that data with specialist steganography detection tools that is why high security steganography software will also include encryption.
For those living under oppressive regimes and subjected to strict communications monitoring, and those living in places where they must hand over their encryption password to the authorities to avoid punishment, steganography is the ideal covert communication method, it has long been used by spies from worldwide agencies, Russian spies in the US in 2010 used steganography software to post photos on the Internet with embedded messages hidden in them.