jaronbarendsI think the best option is to allow the users to toggle the password visibility. I have created three ways to do that> a javascript to put on your own site, and for every other site on the internet a Bookmarklet and a Greasemonkeyscript: http://jaron.nl/blog/2009/how-to-unhide-passwords-on-your-site-and-everywhere-else/
frankstaThis is a really good point and personally when I am putting in a password 9 times out of 10 there is nobody around me when I am typing in a password so I don't mind it being on the screen for a few seconds. That one time I do not mind asking the person to look away for one second but if someone really wanted my password and was behind me they would try and see what I was typing and may figure it out other ways IMHO. The active link to 'show password' is an idea I have thought of before as others have I am sure and as a matter of fact I believe Apple's OSX has that option when entering passwords in some fields throughout the OS.