From LQWiki

Kmail 1.6

In order to get Kmail 1.6 to encrypt emails, you need to have GnuPG installed. With everything properly installed, you can go to the "Settings" menu, select "Configure KMail". Select "Security", and go to the "OpenPGP" tab. Select "GnuPG - Gnu Privacy Guard" from the "Encryption Tool" list, along with any options you would like enabled. Now go to "Identities" and "Modify" the identity you'd like to enable encryption for. Go to the "Advanced" tab and select the OpenPGP key corresponding to your key. Encryption should now work.

There is a howto available at the official KMail website.