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If someone malicously put a keystroke recorder on my computer would they be able to see the master password for LastPass when I enter it?

Yes, they could record your master password, unless you're using the online keyboard: http://helpdesk.lastpass.com/security-options/virtual-keyboard/ for more information.

Another option is multifactor authentication.

Even if someone grabbed your master password, the second authentication method would prevent them from gaining access to your account.

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Sesame, YubiKey, Google Authenticator, Grid, One Time Passwords, Fingerprint Readers, SmartCards, Online Vault, Multifactor Grid, Trusted Devices, Security, Online Vault, Multifactor Authentication

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