How do I create a password for my IPhoto?

There's no way to set a password on one application. Lock the screen or log out when you're away from the computer.

I think you could create a disk image, encrypt it, then move your iPhoto application to the disk image.

See this:

http://support.apple.com/kb/HT1578?viewlocale=en_US&locale=en_US

I do this with a lot of my private documents.

Check the size of iPhoto before you create the disk image, so you know what size to make it.

I think you can, in effect, encrypt iPhoto Library with password protection using a 3rd party tool such as MacFort as a wrapper around the app data,

see http://www.madowsoft.com/the-easiest-way-to-password-protect-iphoto.html