I haven't found a definite answer to this yet. Lots of apps let you build/install custom lock screens without root, etc. It's just like installing an app. I found this in the dev guide: http://developer.android.com/reference/android/view/WindowManager.LayoutParams.html#FLAG_SHOW_WHEN_LOCKED
I assume that while this is running it would run just like any other app. But how would I "release" it to let the user get to their home screen? And do I need to handle things like incoming phone calls?