Unlike encryption, where it is evident that you are trying to hide something from others, steganography allows you to hide secret messages inside a photo (audio, video, etc), post that photo to Flickr, Imgsrc or any other online photoalbum and nobody looking at your activities will notice that you are sending secret data, the receiver will also be safe by visiting a harmless website instead of being seen downloading encrypted messages.
OurSecret is a free steganography tool that can hide text or files inside other any other file, for the receiver to be able to read the message he will have to be using the same software, you can password protect your data to thwart accidental discovery. The carrier file can consist of an image, video, sound file or anything else, the file can be viewed as normal even after data has been hidden in them, after hiding data inside a file you will be offered a location to save it, you should get rid of the original file, an easy way to detect hidden data inside photos is by comparing the original file with the one holding a concealed a message, by destroying the original file you make it very hard to detect that something is hidden unless your opponent is specifically looking for steganography messages and has access to steganalysis tools.
Steganography tools take advantage of unused bits of data in a file to hide data inside them, data is made up of bytes, with 1 byte being made up of 8 bits, if the less significant bit of each byte is modified to hide something inside it, the original file will still work as usual, a file header is another good place to hide data, it normally contains file type information, the end of a file is normally predefined and can be used too, hidden data can be added in those places without significantly altering the original file. By not adding any extra bits to the file and only modifying those that already exist, the chances of discovering hidden data is made more difficult, there are steganography detection algorithms that can be successful finding hidden data but extracting that data is much more difficult, specially if it has been encrypted.
Uncompressed files are the best ones to hide big files, for example, a bitmap .bmp image file will have more spare bits than a compressed .jpeg image, and a .wav sound file will be able to conceal more data than an already compressed .mp3 file.