For example passw0rd would give:
Hey, there. I lost your most recent pubkey. Would you mind sending it over, again?
while a3nomalym@@kZer39jooL would give:
Hey, there. Ready to bomb X embassy in PleaseDon'tRaidMyHouse-istan?
Would be similar to Truecrypt's ability to give "fake" information with certain passwords. This could be useful as an added layer in case a PGP privkey is compromised, for example. I'd guess the initial password key(chain) would have to be given in a very private manner, like in a face-to-face kind of way, then entered with a randomly-scrambling virtual keyboard offline.
A simple XOR scheme would do the trick. I've seen the software somewhere. What it does is it can generate the required password to decrypt the desired plaintext. The password would be as long as the message. This is essentially similar to a one time pad.