You could encrypt the file on your own system before uploading. I'd feel safer doing it that way. I know this is obvious, but I also need to up my post count.
True but not everyone knows how to decrypt and encrypt. Our community is growing into more and more less techie people. Last week I wanted send a encrypted message to someone using GPG keys, they didn't even know what GPG keys are or anything about it. So it is better if the service does it, it would help out a lot more. For me to use a service like his would be that he can encrypt it, otherwise when even use his service, I could just use encryption and send it in an email or over IRC using DCC.