I have a question regarding this option:
# Change to no to disable tunnelled clear text passwords
PasswordAuthentication yes
If set to yes, users can login using the local password.
What exactly does the "clear text" mean in this case?
Is the connection during authentication not encrypted? Is the password issued not hashed?
My main interest is, wether someone can see the password when using ngrep or tcpdump in my WLAN for example.