Imagine I'm trying to encrypt the set of characters {45, 56, 78, 43, 67} with the key {11, 23, 44}.
Does this encrypt like this:
45 XOR 11; 56 XOR 23; 78 XOR 44; 43 XOR 11; 67 XOR 23;
Or am I getting this all wrong?
Yes it is basically like this. Howover, the repetition of the same key over and over makes it a very weak encryption as the key can be easily guessed if you know part of the content.
A better way to do that is not by doing xor
over the same key repeatedly, but by changing the key based on the previous encryption loop. This way the cracker would only have the chance to guess the key by knowing the content of the first cryptographed block, which you may populate with data unknown to him like checksums, timeouts, random salt or whatever.
A very popular exemple of this is the MD5-based block cipher.