To protect private information being sent via email, Outlook offers an encryption option for outgoing mail. Outlook uses "digital signatures" to verify a recipient's identity in order to pass messages. This process is initiated by obtaining a certificate through a select certificate authority or CA such as VeriSign. The certificates work by sharing a set of keys - one public - available to anyone and one private - available only to selected contacts. The email recipient must have both keys to decipher the encrypted email.

The first step is to procure your Digital ID by using one of the recommended CAs through Microsoft. By going to the Options under Tools, the Security tab has a button for "Get a Digital ID" that displays a list of approved CAs. After choosing a CA, the next step is to import your certificate or .cer file into Outlook.

You can import the file through the Options menu or attach the certificate to specific contacts through the Address Book. To give a contact authorization, open their Contact entry and import the certificate under the Certificates tab. By exchanging the certificate, you can share the private keys to allow your trusted recipients to view your messages.

Reference:
Microsoft recommended Digital ID providers
Microsoft Support

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