How to setup password to protect my wireless home network

Hi everyone.
Please bear with me...Im a newbie in Wireless Home networking.
I just bought today a WRT54G wireless router and I was able now to connect a (wired) desktop and WiFi laptop to it.
My questions now are:
1) how do I configure it such that it asks for a password before a device can connect to it?
2) how do I know if someone else, or a neighbor is connecting/ connected to it?
3) Is there a way for me to see list of all devices/PCs that are connected to it...just to know if an "outsider" is connected to it?
Im asking this because when i tried to connect that WiFi laptop, it connects easily without asking for a password. When I clicked on the Wireless network Connections....I found my router that says "Unsecured Wireless Connection"
However I wanted to have it "secured" or password-enalbled so that no one else can have free access to my Internet connection.
Please advise a newbie....will be greatly appreciated

I'm unsure of the firmware for version 7 but most of my adivce should still hold.
after doing some searching on WPA and WEP and WPA2, WPA is better, with WPA2 being better than that
so once you configure it for WPA (or WPA2 if a 54g v7 supports it) it should be as simple as entering a password and remembering it
as for seeing whose connected, that's the only way I know of doing it (on a 54g v5 since that's what I have) is to go into the mac filters and then check and see the wireless mac's that are connected. That's one of the only things I don't like about the 54g, is that there is no easier way to see who's connected.
if you want even more security, you could get the Mac address of your laptop, add it to the mac filter, and configure it so only that mac address can access the wireless router, though going this route means everytime you want to add a new wireless device to the network, you have to add it to the mac filter list.

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