Wrapping selecting text in enclosing characters in Emacs

I use http://www.emacswiki.org/emacs/ParEdit. M-( does exactly this.

Since Emacs 24.1(released 2012-06).
Put this in your emacs init: (electric-pair-mode 1).
Now If you select a word and hit (, it will become (word). Same for ", [, { etc.

For parens you can do M-(. For brackets/braces/quotes you could do:

(global-set-key (kbd "M-[") 'insert-pair)
(global-set-key (kbd "M-{") 'insert-pair)
(global-set-key (kbd "M-\"") 'insert-pair)

Note that if you don't have a region highlighted, it will just insert the pair of whatevers and put the cursor in between them. Also handy for deleting matching whatevers is

(global-set-key (kbd "M-)") 'delete-pair)

EDIT:

Good point in the comments about overriding backward-paragraph. You could bind it to C-{, which might interfere with something in a major mode. insert-pair takes the last key and does a lookup to see what pair to insert, so if you don't want to bind it to something-{ you could bind to this function instead:

(defun my-insert-braces ()
  (interactive)
  (if (region-active-p)
      (insert-pair 1 ?{ ?})
    (insert "{}")
    (backward-char)))

Autopair is the best one of these tools