UPDATE - Good news for webmail encryption: read my review of Freenigma.

Mark Langenhoven and Richard Jones have both developed simple tools to use Gmail while safeguarding the privacy of your email messages. These are not bullet-proof systems, but they provide an easy way to encrypt email messages and keep using your favorite webmail interface. Mark used a Greasemonkey script, while Richard adopted a Firefox extension.

Mark solution does not rely on any certificates or browser built-in list of authorities, but it requires to generate an RSA pair of keys. Unfortunately the provided interface to generate the public and private keys is quite basic and no information are given about the chance to use other RSA pairs of different size. To encrypt your message just add the recipient public key and click “Encrypt”.

Richard, on the other hand, developed a Firefox extension to build S/MIME support for Gmail. It requires the user to obtain an S/MIME email certificate - there are several ways to get one for free - and install it in the Firefox certificate database. If there is an entry for the recipient email address in the certificate database, then the body of the email and any attachments are automatically placed in an S/MIME attachment and encrypted with the recipient’s public key. This encrypted message is then sent to Google for delivery.

Mark and Richard cannot guarantee to keep the prying eyes of NSA out of your mailbox, but they can definitely add more privacy to your email relationships.

picture above from WebProNews.com