I do and I don't. I don't tell every stranger and random acquaintance I meet because people have a bad habit of assuming roleplaying = sexy stuff? When it really doesn't. So I pretty much always have to explain that it's basically collaborative writing and that's it. It gets exhausting. xD

My closest friends and family are familiar with what I do. I roleplay with my roommate on a semi-regular basis (we're both nerds like that) and my family is mostly amused but not entirely sure what to think about it so they don't bring it up or question it.

Then again I've been roleplaying since my Habbo/Yahoo! chat days when I was just a kid so it's nothing new to them at this point.