With Bitcoin 0.7 it's possible to keep your private keys
entirely offline without third party software.

In this example we have two hosts [offline] which is
totally offline and without a copy of the blockchain
and [online] which is a regular online node, both
running bitcoin 0.7.

This example uses the CLI, but it works equally well with
the GUI console interface-- just leave off the "bitcoind"
at the start of every command.

We're going to generate a key on the offline wallet, then
send it 50 BTC with an online wallet, then using the online
wallet draft a transaction to send it back, then sign that
with the offline wallet, and finally announce the signed
transaction into the network using the online wallet.


First generate an address offline:

[offline]$ bitcoind getnewaddress
n1gqLjZbRH1biT5o4qiVMiNig8wcCPQeB9

Then, send it 50 coin:

[online]$ bitcoind sendtoaddress n1gqLjZbRH1biT5o4qiVMiNig8wcCPQeB9 50
a9d4599e15b53f3eb531608ddb31f48c695c3d0b3538a6bda871e8b34f2f430c

Now, grab the transaction that was paying it. We'll need the txid, and the
scriptpubkey paying our offline wallet.

[online]$ bitcoind getrawtransaction a9d4599e15b53f3eb531608ddb31f48c695c3d0b3538a6bda871e8b34f2f430c 1
{
    "hex" : "0100000001344630cbff61fbc362f7e1ff2f11a344c29326e4ee96e787dc0d4e5cc02fd069000000004a493046022100ef89701f460e8660c80808a162bbf2d676f40a331a243592c36d6bd1f81d6bdf022100d29c072f1b18e59caba6e1f0b8cadeb373fd33a25feded746832ec179880c23901ffffffff0100f2052a010000001976a914dd40dedd8f7e37466624c4dacc6362d8e7be23dd88ac00000000",
    "txid" : "a9d4599e15b53f3eb531608ddb31f48c695c3d0b3538a6bda871e8b34f2f430c",
    "version" : 1,
    "locktime" : 0,
    "vin" : [
        {
            "txid" : "69d02fc05c4e0ddc87e796eee42693c244a3112fffe1f762c3fb61ffcb304634",
            "vout" : 0,
            "scriptSig" : {
                "asm" : "3046022100ef89701f460e8660c80808a162bbf2d676f40a331a243592c36d6bd1f81d6bdf022100d29c072f1b18e59caba6e1f0b8cadeb373fd33a25feded746832ec179880c23901",
                "hex" : "493046022100ef89701f460e8660c80808a162bbf2d676f40a331a243592c36d6bd1f81d6bdf022100d29c072f1b18e59caba6e1f0b8cadeb373fd33a25feded746832ec179880c23901"
            },
            "sequence" : 4294967295
        }
    ],
    "vout" : [
        {
            "value" : 50.00000000,
            "n" : 0,
            "scriptPubKey" : {
                "asm" : "OP_DUP OP_HASH160 dd40dedd8f7e37466624c4dacc6362d8e7be23dd OP_EQUALVERIFY OP_CHECKSIG",
                "hex" : "76a914dd40dedd8f7e37466624c4dacc6362d8e7be23dd88ac",
                "reqSigs" : 1,
                "type" : "pubkeyhash",
                "addresses" : [
                    "n1gqLjZbRH1biT5o4qiVMiNig8wcCPQeB9"
                ]
            }
        }
    ]
}

And lets get an address to return those coins to:

[online]$ bitcoind getnewaddress
mkZBYBiq6DNoQEKakpMJegyDbw2YiNQnHT

Now, from our online node we're going to draft the transaction to
return the coin from the offline wallet to the online one:

[online]$ bitcoind createrawtransaction '[{"txid":"a9d4599e15b53f3eb531608ddb31f48c695c3d0b3538a6bda871e8b34f2f430c","vout":0}]' '{"mkZBYBiq6DNoQEKakpMJegyDbw2YiNQnHT":50}'
01000000010c432f4fb3e871a8bda638350b3d5c698cf431db8d6031b53e3fb5159e59d4a90000000000ffffffff0100f2052a010000001976a9143744841e13b90b4aca16fe793a7f88da3a23cc7188ac00000000

One the offline wallet we decode the transaction to validate that its doing
what we expect. Note: Since we don't have the input transaction we don't
know the input value and this txn could be paying a ton of change out
to fees.

[offline]$ bitcoind decoderawtransaction 01000000010c432f4fb3e871a8bda638350b3d5c698cf431db8d6031b53e3fb5159e59d4a90000000000ffffffff0100f2052a010000001976a9143744841e13b90b4aca16fe793a7f88da3a23cc7188ac00000000
{
    "txid" : "d9f33ed2740eef77e40e72b692c4cf1feb6ab10d8adaaf27eb394fa5064b1160",
    "version" : 1,
    "locktime" : 0,
    "vin" : [
        {
            "txid" : "a9d4599e15b53f3eb531608ddb31f48c695c3d0b3538a6bda871e8b34f2f430c",
            "vout" : 0,
            "scriptSig" : {
                "asm" : "",
                "hex" : ""
            },
            "sequence" : 4294967295
        }
    ],
    "vout" : [
        {
            "value" : 50.00000000,
            "n" : 0,
            "scriptPubKey" : {
                "asm" : "OP_DUP OP_HASH160 3744841e13b90b4aca16fe793a7f88da3a23cc71 OP_EQUALVERIFY OP_CHECKSIG",
                "hex" : "76a9143744841e13b90b4aca16fe793a7f88da3a23cc7188ac",
                "reqSigs" : 1,
                "type" : "pubkeyhash",
                "addresses" : [
                    "mkZBYBiq6DNoQEKakpMJegyDbw2YiNQnHT"
                ]
            }
        }
    ]
}

If we're happy, we'll sign. We need to provide the scriptpubkey of the
inputs we're signing so our offline wallet knows which of its keys
to use.

[offline]$ bitcoind signrawtransaction 01000000010c432f4fb3e871a8bda638350b3d5c698cf431db8d6031b53e3fb5159e59d4a90000000000ffffffff0100f2052a010000001976a9143744841e13b90b4aca16fe793a7f88da3a23cc7188ac00000000 '[{"txid":"a9d4599e15b53f3eb531608ddb31f48c695c3d0b3538a6bda871e8b34f2f430c","vout":0,"scriptPubKey":"76a914dd40dedd8f7e37466624c4dacc6362d8e7be23dd88ac"}]' 
{
    "hex" : "01000000010c432f4fb3e871a8bda638350b3d5c698cf431db8d6031b53e3fb5159e59d4a9000000006b48304502201123d735229382f75496e84ae5831871796ef78726805adc2c6edd36d23e7210022100faceab822a4943309c4b6b61240ae3a9e18ed90a75117c5dc4bfd8f7e17a21d301210367ce0a1c3b3e84cece6dad1a181d989d8e490b84f5431a1f778a88b284c935e6ffffffff0100f2052a010000001976a9143744841e13b90b4aca16fe793a7f88da3a23cc7188ac00000000",
    "complete" : true
}

Then we'll carry the transaction over to the online wallet and
announce it:

[online]$ bitcoind sendrawtransaction 01000000010c432f4fb3e871a8bda638350b3d5c698cf431db8d6031b53e3fb5159e59d4a9000000006b48304502201123d735229382f75496e84ae5831871796ef78726805adc2c6edd36d23e7210022100faceab822a4943309c4b6b61240ae3a9e18ed90a75117c5dc4bfd8f7e17a21d301210367ce0a1c3b3e84cece6dad1a181d989d8e490b84f5431a1f778a88b284c935e6ffffffff0100f2052a010000001976a9143744841e13b90b4aca16fe793a7f88da3a23cc7188ac00000000
7822dda72d9bf421d2f3eedc678bf58c6e4c10cdd047b9e137559ad384933ef5

And we can see the online wallet has been paid:

[online]$ bitcoind listtransactions "" 1
[
    {
        "account" : "",
        "address" : "mkZBYBiq6DNoQEKakpMJegyDbw2YiNQnHT",
        "category" : "receive",
        "amount" : 50.00000000,
        "confirmations" : 0,
        "txid" : "7822dda72d9bf421d2f3eedc678bf58c6e4c10cdd047b9e137559ad384933ef5",
        "time" : 1344221517
    }
]