Using different passwords for different web sites and applications is a simple way to add layers of identity theft protection to your online world. The reason that many don't do it is obvious; you end up with more passwords to forget.
A password keeper is a helpful solution, allowing you to store your passwords, PINs, etc. in an encrypted file on your mobile device. A new iPhone app called MobileSitter takes that concept a step further by returning a bogus value if someone attempts to hack, say, your ATM PIN.
The false answer is designed to fool the hacker into ending their attack on your device and then wasting their time trying to use bad information. An interesting concept that may be a good way to harden your iPhone security.