Options

You can prevent other people from opening a workbook and/or modifying it by assigning a password to it.
The easiest way to save a workbook with password protection is to select (Tools > Options)(Security tab).
You can enter a password to open the workbook and it is also possible to enter a different password to be able to modify the file.

General Options

You can also assign password protection from the (File > Save As) dialog box.
Press the Tools drop-down button and choose "General" options.

Always create backup - Saves a backup copy each time you save the workbook. For more details please refer to the Saving Workbooks page.
Password to Open - Type a password in the Password to open box to prevent others from opening a workbook without the password. A password is case sensitive and can contain up to 15 characters, including letters, numbers, and symbols. If you lose the password, you cannot open the workbook.
Password to Modify - Type a password in the Password to modify box to prevent another user from opening, making changes in, and saving the workbook without a password. If someone opens the workbook as read-only and changes it, it must be saved with a different name. A password is case sensitive and can contain up to 15 characters, including letters, numbers, and symbols. If you lose the password, you cannot open the workbook.
Read-only recommendation - Recommends that others open a workbook as read-only. If someone opens the workbook as read-only and changes it, it must be saved with a different name.

After the read-only option has been set anyone who opens the file will receive a prompt asking them to open the file as read-only.
Unfortunately the prompt does not enforce the read-only. Any changes made can be saved to a new file with a different name.
You can prevent other people from modifying your workbook(s) by password protecting them. Enter a password in the "Password to modify" field. The workbook can be opened as "read-only" without the password.
You can have a maximum number of 15 characters

Features Unavailable

By protecting a worksheet it is possible to protect individual cells from being modified, resized, moved or deleted.
The following commands though are automatically disabled for the whole worksheet even when you allow the users to perform all the available options from the Protect Sheet dialog box.
1) (Edit > Delete)
2) (Edit > Links)
3) (Edit > Object)
4) (Format > Cells)(Alignment tab)("Merge cells")
5) (Insert > Name)
6) (Insert > Picture)
7) (Insert > Diagram)
8) (Insert > Hyperlink)
9) (Tools > Spelling)
10) (Tools > Error Checking)
11) (Data > Filter)
12) (Data > Subtotals)
13) (Data > Validation)
14) (Data > Table)
15) (Data > Text To Columns)
16) (Data > Group and Outline)
17) (Data > Import Extermal Data)
18) (Data > List)
19) (Data > XML)
20) (Data > Refresh Data)