DocSecrets is an Add On that allows to to hide and encrypt senitive information in a doc. The encryted information is never sent or stored unencrypted.
A word of caution, while a passphrase should be secure, if it is lost or you can't remember the passphrase, you will not be able to un-encrypt the data.
With that said, the DocSecrets add on is simple to use. You are given two encrypting options; inserting text and censuring text. Inserting text allows you to insert encrpted text anywhere you put the cursor, and censure text allows you to encrpt the text you select.
Any time you open the add on you will need to input your passphrase which gives you access to the encrypted text. Without the passphrase the information will remain encrypted. While it is possible to use this for collaboration, in order to do so you give users read and write access which sort of defeats the purpose.
The use scenario I see for this app is you are sharing a document but it has a section or two you would still like to keep private. You can censure and encrypt those selections while still sharing the document with others.