I type in my password and it dosn't display in the bar where it shows what you have typed. Then dulls out as if I hadn'the been pressing keyboard. It then works after 3 or 4 attempts.
Try turning the phone off, then turning it back on. If that doesn't fix it, you'll probably have to back everything up, reflash the firmware, then restore everything. (If you don't know how to reinstall the firmware, back everything up and see if a local repair shop, or your carrier, can reflash the phone for you. [Yes, if you go to a repair shop you will have to pay something.])