[wootest]

Many designs does this implicitly. At least one, the original iPhone keyboard autocomplete/suggestion algorithm, did it explicitly.

Ken Kocienda's book Creative Selection has a very good chapter on the algorithm being built piece by piece, but finding out words being created by surrounding keys was part of collecting all the candidates.

They even used this in marketing. One of the pre-original-iPhone-launch videos was focused just on the on-screen keyboard (probably because almost everyone thought it was a really kooky idea at the time), and used the example of explicitly pressing "O-U-Z-Z-A" but still getting "pizza" as the autocomplete because it was the closest recommendation.

One of the iOS versions a few years ago became incredibly fond of including the space bar and considering alternatives with slightly off key presses near the space bar split into two or more words. When you're using a language with a lot of compound words like Swedish, this yielded some almost postmodern corrections with one or more words often completely different (but close on the keyboard, of course). I don't know if this was a tweak to the manual algorithm going off the rails or an AI version that wasn't quite tuned well yet.