How to Answer 'What Other Companies are You Interviewing With?'

This question always throws people for a loop. Why are they asking, and how much do they actually need to know?
Well, hiring managers are curious about what other companies you're interviewing with for a few reasons. They might want to scope out the competition, see how serious you are about the industry or even gauge their likelihood of landing such a star candidate.
So, how do you respond to this in a way that doesn't make you sound desperate or unattainable? Here are some ideas, depending on your particular situation.
If you're interviewing for competitors: Say you have a couple of interviews set up at other companies within the industry. That's a great position to be in.
If you're not interviewing anywhere else: You know not to say this directly, but how do you get around it? The trick is to simply choose to answer a different question. Instead of responding with your lack of other interviews, let your interviewer know what types of positions and companies you've been applying to.
In short, you want to answer the interviewer in a satisfactory manner, but you also want to get across that you're especially invested in the position you're currently interviewing for. As with all interview questions, you and the interviewer both have agendas. Answering well requires accomplishing both.