Does everyone on the wireless network have access to the shared files?

I just bought a 1TB time capsule today. I am backing up my files as I type. I also used it to set up a wireless network in my apartment. This wireless network will be used by my roommate as well.
In addiction to backing up my files using Time Machine, I am also going to use my new TC as an external hard drive to store movies, music, photos, and documents. I would like my roommate to have access to the wireless internet, but I do NOT want them to have access to my files.
I noticed that my TC shows up in the SHARED section in my finder. Does this mean that, because my roommates have access to my wireless network, that they have access to my files through the TC shared drive? If so, how can I protect my files?

I found this in the Airport Help. It works with the TC drive and any other drives attached.
To set up a user account:
Open AirPort Utility, located in the Utilities folder in the Applications folder on a computer using Mac OS X, and in Start > All Programs > AirPort on a computer using Windows.
Select the device you’re setting up, and then click Manual Setup. Enter the password if necessary.
Click Disks in the toolbar, and then click File Sharing.
Choose "With accounts" from the Secure Shared Disks pop-up menu, and then click Configure Accounts.
Click Add , enter the user name, and then give the user a password.
Choose Read and Write, Read Only, or Not Allowed from the File Sharing Access pop-up menu, depending the access privileges you want to assign for this user.

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