Like Albert Woodhull has said:" the Linux loop device can be used to handle this - it makes a file look like a file system, and the file can be defined as a byte offset from the beginning of a primary partition". Yes, the loop device can be added the encryption function and then we write data into it. So, we can convert an encrypted file into a loop device, and then we mount this loop device, just like to mount DVD disk to the local file system. And we should know that not only the content of the file is encrypted, but also its FHS information, the name of the file, the permission of this file and so on…. 

"Cryptoloop" is the software using the "Cryptographic API" and it offers the support to the exiting different encryption algorithm, like the AES, DES, Bolwfish, Twofish, and Serpent, which are included by the "Scatter list Cryptographic API".