I have a linksys router. Rather than mess with the encryption, I use the mac filtering feature. It only allows the devices with the mac address I specify to access the network.

What I'd like to know... is that secure? I know it doesn't encrypt what goes in the air wirelessly, but if you don't have access to the network, can you even sniff that information?

Mac addresses can be changed and its not safe to use wireless without encryption. There is videos out there on how to hack wireless encrypted networks so if yours is un encrypted then you can bet its a lot more less secure and easier to hack.

It is possible to 'spoof' a MAC address (i.e. change the MAC address) for some hardware. If someone found out one of your MAC addresses, they could simply set their hardware to use that MAC address and get onto your network. People sniffing packets may also be a problem. As all the data is being sent unencrypted, there is the possibility people could read that data pretty easily without being on the network.

Set up WPA-PSK encryption on all your hardware, if it supports it (if not, go for WEP). Give it a very complicated and secure password - you will only need to enter it one time on each PC, so it doesn't really need to be so simple you can remember it easily. Make the password the maximum possible length and include lots of special characters if you can.