I was thinking of making a small tool. It is not important what the tool will do. The important thing, is that the tool will need to store some sensitive information on the
You can use the native encryption facility. Set the encrypt attribute on your folder or file (from the property page, click on the "advanced" button). Then you can set the users that can access the file (by default this only includes the file creator). The big advantage of this solution is that it is totally transparent from the application and the users points of view.
To do it programmatically: using the Win32 API, call EncryptFile() on the directory where you want to store your sensitive per-user data. From now on all newly created files within this dir will be encrypted and only readable by their creator (that would be the current user of your app). Alternatively you can use the FILE_ATTRIBUTE_ENCRYPTED
flag on individual files at creation time. You can check encryption info from the explorer on the file's property page, and see that app-created files are correctly encrypted and restricted to their respective users. There is no password to store or use, everything is transparent.
If you want to hide data from all users then you can create a special app-specific user and impersonate it from your app. This, along with ACLs, is the blessed technique on Windows for system services.