[Thanks to Imaging Resource]Overcome Your Fear of Shooting Street Photography, free ebook.
I think that dealing successfully with strangers, whether in photographing them or in other contexts, a very important ingredient, well two really, is 1) knowing that you are doing nothing wrong, and showing it in your body language. 2) Being open and friendly. This of course ties in with the first one. People who have a bad conscience about what they are doing are usually acting defensively or antagonistically. If you are open and friendly, people will come into your space without automatic suspicion.
Also, be chatty. Start talking about some aspect about the subject or photos, or your camera. People probably won't be interested, but actually the more geeky your chat is, the better, people will get bored and will conclude that you are a harmless eccentric.