Alice -> Encrypt("RETREAT", Pad[128:7])
You intercept this message and you're not sure if it means "RETREAT" or "ADVANCE". But contextually, you know it's one of the two, and you want to sew confusion. Mallory -> XOR(Ciphertext, XOR("RETREAT", "ADVANCE")) -> Bob
And then Bob reads this message as the opposite of what Alice sent. Bob -> Decrypt(Cipher2, Pad[128:7])
Thus, the lack of ciphertext integrity allowed Mallory to gain an advantage in her goal as an attacker to sew confusion between two generals. If Alice advances, Bob retreats, and vice versa.It doesn't really matter, to this security game, if you learn anything about the key from the malleability. You chose the ciphertext, and thus you succeeded in dividing their military force.