On our roadmap. Will happen when it happens.
If you want to help code it, we will be happy to get you started.
OTR is short for "off the record" and is an encryption scheme that sits _on top_ of all messaging layers providing point-to-point encryption/auth. It is not an official part of any communication protocol but a layer on top written by some cryptographers.
Wikipedia, as always, says it best: Off-the-Record_Messaging
When we started KTp OTR was being considered for implementation at the Telepathy level, up from us. As such we were waiting on it to be implemented in the library we used, and we would add the UI on top. There was a GSOC project on this, but this was never merged into Telepathy (https://gitorious.org/jprvita-repos/telepathy-gabble/commits/otr), and as such we have nothing to build upon. We could implement it ourselves, on top of the Telepathy layer. This is a slightly less "clean" solution, but the most realistic.
Encrypting messages is at the wrong level, encrypting the entire stream (i.e XEP-0188 which is lower in the stack) is so much simpler, provides greater security and is "right".
libOTR isn't an ideal solution.
If someone wants to implement it in KTp we will be happy to help. We have a message filtering plugin which could be adapted to work with this, and the plugin from Kopete could be ported with medium changes. We will happily adapt our plugin system to try and support it and anyone stepping up to the coding challenge.
It's something that's now on our roadmap, and we've got some precursor refactoring underway at the moment. Then it will be mostly a copy and paste job from Kopete.
Angry comments on blog posts/mailing lists/social networks will not make it happen faster. Please do not do that.
GTalk also has an implementation of something called "OTR" which is Off the Record which turns off server logging, This is completely different and is a documented XMPP extension. This is something I would like to add.