The Google Cloud Platform Blog entry Google Cloud Storage now provides server-side encryption explains.
"... Google Cloud Storage now automatically encrypts all data before it is written to disk, at no additional charge. There is no setup or configuration required, no need to modify the way you access the service and no visible performance impact. The data is automatically and transparently decrypted when read by an authorized user.
If you require encryption for your data, this functionality frees you from the hassle and risk of managing your own encryption and decryption keys. We manage the cryptographic keys on your behalf using the same hardened key management systems that Google uses for our own encrypted data, including strict key access controls and auditing. Each Cloud Storage object’s data and metadata is encrypted with a unique key under the 128-bit Advanced Encryption Standard (AES-128), and the per-object key itself is encrypted with a unique key associated with the object owner. These keys are additionally encrypted by one of a regularly rotated set of master keys. Of course, if you prefer to manage your own keys then you can still encrypt data yourself prior to writing it to Cloud Storage.
Server-side encryption is already active for all new data written to Cloud Storage, whether for creating new objects or overwriting existing objects. Older objects will be migrated and encrypted in the coming months."
It is unclear to me if Google Drive is also automatically encrypted. If not, the BoxCryptor app may be just the ticket. It works on Google Drive as well as Dropbox, box, SkyDrive, etc...
Who knows, maybe BoxCryptor will be upgraded to work with Google Cloud Storage.