How Encryption and Key Exchange Works
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A simple demonstration of how two people can agree on a secret key, even though all of their communications are carried out in public.

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In the electronic world, secret key exchange allows computers to communicate securely, and is used, for example, when you give your credit card information to an on-line shop.   But what if Pippa refused to pass the box along and impersonates the second lock with her own lock?  Eventually she removes her lock from the box and gets inside.  This is commonly referred to as a "Man in the Middle attack", and is a fairly common way of breaking this kind of key exchange.  The most common way around the problem is to essentially have a trusted third party verify a piece of information about both parties.  The information about the third party has to be agreed on ahead of time over a secure channel; in other words, you have to have an additional piece of information that both parties trust before you can exchange keys over the insecure network.  In the real world, the trusted third party is called a certificate authority.
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