I like the idea of encryption

You could use the Ceasar Cypher: When you're encrypting a bit, add a fixed value to it before writing it to file. If your addition value is +2, then A => C. It's super simple to implement and its also pretty simple to thwart. You could make it slightly more complicated by using a pseudo random number generator to generate your fixed values. The key is that the sequence of random numbers needs to be the same every time. So, if you generate a random value between 1->26, and then add that value to your byte, you'd get something like:
Unencrpted string: {AAAA}
Random Numbers: {13, 21, 4, 16}
Encrypted String: {A+13 => N, A+21 => U, A+4=>D, A+16=>Q}

So, if someone knows that their health is 16 and they open up your file to look for that value, they won't find it But, if they are really determined and reverse engineer your code to figure out what encryption algorithm you're using and the random number seed you're using as a key, then they can easily decrypt and encrypt your saved data file. I'd probably not concern myself with the 0.01% of the population who might do that.
If you want to use a nuke to hammer a fly, you could look into using AES 256 bit encryption. Nobody will crack that without extreme effort and hardware. It's military grade

The people that care to hack your save game data are going to hack your save game data, regardless of any encryption or obfuscation. Everyone else doesn't give a shit. You might as well reduce your development time by not going out of your way to complicate things overmuch.

I think the cryptographic community would strongly disagree with you. A file encrypted with AES256 would take longer than the age of the universe to break via brute force. It's certified by NIST to process up to top secret data, so save game files would probably be pretty safe. I'm betting that there's code floating around somewhere out there which implements AES, so adding it would be relatively trivial.

I agree with the above. people will hack the save data if they want to. however, if you really want to encrypt the save data, I would suggest developing an enigma-based encryption algorithm.[/quote]
Enigma ciphers? Uhm, no. If the allies were able to break that during WW2 with rudimentary computing power, it doesn't speak well towards the security of the cipher. I strongly suggest using AES since it meets modern security standards.

If you use AES, your game data won't be hacked by someone decrypting it. They'll have to modify the game data while its sitting in memory.

I think the cryptographic community would strongly disagree with you. A file encrypted with AES256 would take longer than the age of the universe to break via brute force. It's certified by NIST to process up to top secret data, so save game files would probably be pretty safe. I'm betting that there's code floating around somewhere out there which implements AES, so adding it would be relatively trivial.

But if it's encrypted, how is the game supposed to be able to load its own save game files? If it uses the encryption key to decrypt it, then someone will be able to hack that from the executable. Whilst this will be harder than simply reading it from plain text, this is still a case of obfuscation, and therefore could be broken more directly.

I do agree though that if one did want to do something like this, one might want to look at modern methods, rather than messing around with things like Caesar ciphers. Is there a known good solution for this problem? I guess this is similar to issues of DRM (though IIRC in some cases DRM systems have the advantage of hardware support).

Though I agree with others that (for single player at least) it's not worth worrying about. Perhaps save as binary just so it isn't totally trivial, but if someone wants to spend time hacking it, who cares? (And if someone releases a game-save-editor as sometimes happens, then they're creating extra awareness and advertising for your game!)