EncFS is an option, as well as dm-crypt. ZFS has transparent encryption, but has only userspace support for linux.

http://en.wikipedia.org/wiki/EncFS

BTRFS is the future filesystem of linux, much like ZFS. It will eventually support transparent encryption.

As far as user-interaction for entering keys and such, well, that's probably best left up to the client-side. Really, for ultimate security, the client should encrypt the files themselves.