I read an article the other day about confusing keystroke loggers which went like this.
Say your password was ABCDEFG if you type in ABCDE then using the mouse you click between the C&D then type DEFG, what you then have is your correct password with 2 extra characters to the right of the cursor which you delete by pressing the delete key. Because keystroke loggers don't monitor the mouse, as far as it is concerned you typed in ABCDEDEFG then deleted the F&G leaving ABCDEDE
That is the best way to guard against hardware keyloggers, type it in with a mistake and then click back and delete a few of the missings bits.
A determined hacker will probably be able to still work your password out but if it is just an automated script that will then hack your hotmail, you will probably foil it.

