If it's for email, it's fully dependent on your mail client, and DreamHost has nothing to do with it.
If it's for encrypting a web-generated (i.e. formmail) message, then I don't know. I suppose you'd have to install PHP in your account.
The part about putting public keys on your keyring is if you want to send an encrypted message to someone. You get their public key, put it on your keyring, then use that key to encrypt the message. They have their private key which is needed to decrypt the message.