I just literally tell people what I'm doing, though I remove any potential for suggesting I'm currently incompetent at my task.
"I'm testing this new lens in low light" or "I've got this new lens & I'm seeing how it looks"...
You really don't need to be very specific - keep the details very light. I'd avoid just saying "I'm practising" or that I'm testing a new ND filter, because they won't understand. Telling them it's something 'new to you' will cover the amount of interest most people actually have & everybody knows what a lens is. Also 'testing' sounds better than 'practising' though no-one will spot precisely what you said. If you get someone who is actually interested, or another photographer, then the conversation rapidly changes direction anyway.
If a vaguely interested non-photographer wants some pictures of them in that situation, I just take them. Get them to pose, feel like they're participating, show them how you'd talk to a model to get them to do specific things. "Push your chin forward, it makes you look slimmer. Don't lift your head, just push… that's it."
They learned a new trick & you only wasted 5 minutes max.
If they want copies I get their email address, but they don't get mine. I don't get a release [that would change the casual nature of the episode*] & I don't use the material. I also say as I'm just experimenting with the 'new toy' I'm not sure there will be anything worth seeing. If there is, I might send them one or two shots, low qual jpgs. The chances of me sending them are inversely proportional to the chances of them wanting to strike up any kind of relationship that doesn't involve them paying me for my future services.
*Always having releases in your pocket allows you to change your mind at any time during this 'free 5 mins', if you think you're actually going to get something usable from the chance encounter. Don't burn your bridges ;)
To be honest, a lot of this is just 'people skills'. Figure out what they actually want & deal with it appropriately.
45-year old bloke whose dad once had an instamatic: Give him more details than he can cope with & he'll go away.
Gaggle of teenage girls: Make damn sure they're properly & decently clothed & take a few snaps. Send them one for Instagram.