zip & unzip file with password(web application)

First of all, you will need the password.
 
For working with ZIP, with passwords or not, you can use #ziplib:
http://www.icsharpcode.net/opensource/sharpziplib/[^].
 
Another option is using SevenZipSharp, a .NET wrapper of the famous 7-Zip:
http://en.wikipedia.org/wiki/7-Zip[^],
http://sevenzipsharp.codeplex.com/[^].
 
Both ZIP libraries are open-source.
 

—SA