ESET Security offers an excellent analysis on wireless security setup and WPA2 should be used for the best current levels of protection.

Wireless Security – None v WEP v WPA v WPA2
http://blog.eset.com/2011/12/30/could-hackers-break-into-your-wi-fi-wireless-router

QUOTE: You just got a new wireless router for Christmas, but when you set it up it asks about wireless security. Do you want WEP, WPA, WPA2 or any of the other alphabet soup options they give? While it’s easiest to just pick the default setting, are you setting yourself up for trouble from aspiring hackers? And what about the new WPS hack tool – called Reaver – does that make things worse?

NONEMany people never set a password to protect their WiFi, after all it’s just one more password to remember, right? And your neighbors aren’t THAT evil (you hope). On the other hand, if the neighbors use your internet, it could make everything slow down, and if they get malware, it can spread to computers in your house and leave some unwanted gifts which can be quite painful.

WEP — Let’s start with WEP (Wired Equivalent Privacy). WEP is a vast improvement over no password. Think of it like a car with at least the doors locked. The door locks might not be the ultimate in security, but lacking even basic door locks leaves you wide open to thieves, so it’s better than nothing. It will deter simplistic thieves as they may look for other easier opportunities. But if they wanted to crack it, WEP won’t give them much of a workout. Using modern tools, WEP can be cracked in a few minutes, and you’d have a mistaken sense of security that your home and network are protected. So let’s move up the security chain to something beefier that’s also an option on most modern routers, WPA.

WPA/WPA2 — WPA is short for Wi-Fi Protected Access, is tougher to crack. WPA2 was later added, making it even more difficult by toughening the encryption used on the traffic from your computer to the router. This makes it much more difficult for bad actors to intercept and trick your internet traffic into going places other than where you intend. If you have the choice, this is definitely an improvement over WEP, so use this at a minimum, preferably WPA2 if you have the option. Some routers also will give an option of TKIP vs. AES, use AES if you have the choice, it’s more secure.