We discuss the principle, and experimentally demonstrate an optical encryption system that uses the polarization of light to encrypt a binary image. The encryption is done by an exclusive-OR (XOR) operation between the image and a random phase code (key to encrypted data). The XOR operation is done in the polarization domain of coherent light by using two ferroelectric liquid crystal spatial light modulators. The information encoded as polarization states of coherent light is converted to intensity variations by using a polarizer. The decryption of the encrypted data is done by a second XOR operation between the encrypted image and the key.