A Parallels virtual machine can be encrypted to make its files unreadable to anyone except those authorized to do so. When configuring a virtual machine, you have an option to encrypt its files if desired. When this option is selected, the user is asked to enter a password and then the virtual machine files are encrypted using an encryption algorithm. Once this is done, the virtual machine cannot be started without providing the correct password and its files cannot be read using standard Parallels or third party utilities.
An encryption module is provided by Parallels and is built into the Parallels Desktop. The built-in module uses a sufficiently strong and fast encryption algorithm.
If, however, you would like to use your own (or third-party) encryption module, the Parallels Virtualization SDK provides an API that allows to custom built an encryption plug-in and then use it instead of the built-in one.
Parallels Virtualization SDK Programmer’s Guide is available at parallels.com/products/desktop/support