The present study deals with Transparent Data Encryption which is a technology used to solve the problems of security of data. Transparent Data Encryption means encrypting databases on hard disk and on any backup media. Present day global business environment presents numerous security threats and compliance challenges. To protect against data thefts and frauds we require security solutions that are transparent by design. Transparent Data Encryption provides transparent, standards-based security that protects data on the network, on disk and on backup media. It is easy and effective protection of stored data by transparently encrypting data. Transparent Data Encryption can be used to provide high levels of security to columns, table and tablespace that is database files stored on hard drives or floppy disks or CD’s, and other information that requires protection. It is the technology used by Microsoft SQL Server 2008 to encrypt database contents. The term encryption means the piece of information encoded in such a way that it can only be decoded read and understood by people for whom the information is intended. The study deals with ways to create Master Key, creation of certificate protected by the master key, creation of database master key and protection by the certificate and ways to set the database to use encryption in Microsoft SQL Server 2008.