The Private Room is a place where you can chat with 'selected people'. It is started by one of the participants who picks a name (i.e. the code word) for the room, for example "ISHQ" (which is btw a very kewl movie...).
Press 'private chat' button. Then type in the name.
If the room does not exist (i.e. no one chosen the same name ) then you will be taken to the new room.
If someone else has chosen to create a room 'ISHQ' then you will taken to it. So, you should choose unguessable names for private rooms. Now you can IM the other participants the name. When they type in the name they will come into your room.

Create a private room