Psychological is a term describing the thought processes of those operating from a state of psychosis.
Examples of psychological inner dialogue:
[Encountering an old friend]
"Filthy damned Zionists! Why can't we go back to Russia?"
[Purchasing a cup of coffee and morning newspaper] "Oh, you THINK it was orange."
[Upon seeing two cats copulating] "Where'd they hide my insulin, you fancy French libertines!?"
This makes perfect sense to the psychological person - and indeed anyone with a healthy mental life - but is difficult to follow for those with an aberrant state of mind (other segments of the differently-sane, serial typists, Ted Rall, etc. . .)
It should be noted that often those who misunderstand basic psychological principles are the first to try to apply them to their friends. This phenomenon is called "pop psychology" by those it is inflicted on, and the perpetrators are known to professional psychologists as "douchebags."