I've done it for years. And, for the most part, nobody minds.
Start by knitting at lunch. Take your lunch and your knitting someplace that is NOT your desk/cubicle/workspace. Sit. Eat your lunch. Knit.
People will ask you strange (dumb) questions. Answer them as you see fit. I also find this is a great way to break into Knitting In Public (KIP), as you mostly know the people you work with, and it's easier to come out to friends.
Keep your knitting close at hand. Mine sits on my desk All. The. Time. When I get to work in the morning, I take my glasses, my cell phone, and my knitting out of my bag. If its here, then when I'm running a report that takes forever, or talking on the phone to the most boring person in the world, or whateve, I can pick it up, and knit a few stitches (or a few rows, depending).
One more quick trick. Open a really large file (spreadsheet or instruction booklet, or whatever). Knit as you read. Tell whoever asks that the knitting helps you focus (works GREAT when you follow up with "I have ADD, you know!"
What to say when busted knitting at work:
I'm still at lunch.
I'm on my break.
I'm running this report (point to computer officiously, and expect them to nod knowingly).
I'm thinking (bend head lower, and knit very quickly).
I can't remember ever actually being busted knitting at my desk, but I do it all the time, and I guess I must have. Most days I don't have time to knit, but when I do, it's right where I can get to it quickly. Everyone who knows me - or is vaguely acquainted with me knows I knit. I wear a lot of my knitted stuff, and whenever I wear anything knitted, I'm always asked "Did you knit that???" They always ask hopefully, like I have the keys to the universe or something, and I never have the heart to point out the difference between machine- and hand-knit. I just say, no, not this one. And move on.