Is it possible to create a compressed file protected by password that can be opened on Mac & PC? Is it possible, on a Mac, to create a password-protected zip file, that can be decompressed on a PC and on Mac without problems? Is there a free way to do it if possible?
The terminal command

zip -ejr [(path to) archive_name.zip] [path to folder to be zipped]


should do the trick. You will be prompted to enter and verify a password.

The encrypted file can be unzipped from the Finder, you'll be prompted for the password. The file should also be useable on Windows, 'nix OS's, and every other file system that supports zip:


  zip  is  a compression and file packaging utility for Unix, VMS, MSDOS,
         OS/2, Windows 9x/NT/XP, Minix, Atari, Macintosh, Amiga, and Acorn  RISC
         OS.   It  is analogous to a combination of the Unix commands tar(1) and
         compress(1) and is compatible with PKZIP (Phil  Katz's  ZIP  for  MSDOS
         systems).


source: zip man page

If you want a GUI solution, it shouldn't be too difficult to create an Automator workflow to automate this process.